Economics Exam 1

If Maria is willing to pay $50 for a sweatshirt, how much consumer surplus does she earn if the market price for sweatshirts is $27.50 each? a. $27.50 b. $50.00 c. $77.50 d. $22.50

d. $22.50

Firms are willing and able to sell 100 guitars per day at a price of $250 per guitar. What price will firms require to sell 100 guitars per day if there is a tax of $15 per guitar? a. $235 b. $250 c. between $235 and $250 d. $265

d. $265

At a quantity of 80 units, it costs sellers _____ to produce the last unit, but buyers value this last unit at _____. a. $80; $50 b. $50; $20 c. $20; $80 d. $80; $20

d. $80; $20

In 2014, California institute a ban on single-use disposable plastic shopping bags due to concern over plastics pollution. Which graph depicts what happened in the market for reusable cloth bags in California?

Graph A

Joe runs a landscape business. He knows that providing landscaping services costs him $100 per hour on average, while the cost of providing such services is $150 per hour after 5 pm (due to overtime pay, reduced productivity, and the added wear and tear on his equipment). A potential client offers Joe $130 per hour to provide services but needs him to provide the services after 5 pm due to circumstances at the property. a. Joe should take the job, since $130 exceeds his average cost of production. b. Joe should take the job, since he is making a $30 profit per hour. c. Joe should decline the job, since he would lose $150 per hour worked on the job. d. Joe should decline the job, since he would lose $20 per hour worked.

Joe should decline the job, since he would lose $20 per hour worked.

What are the total gains from trade at the free market equilibrium? a. $1,000 b. $500 c. $0 d. $1,500 ​

a. $1,000

What is the producer surplus at a price of $2 per unit? a. $5 b. $6 c. $10 d. $20 ​

a. $5

The equilibrium price is: a. $8. b. $10. c. $16. d. $12. ​

a. $8.

The elasticity of demand for a good is -0.75. A 4% increase in price will cause a: a. 3% decrease in quantity demanded. b. 5.33% increase in quantity demanded. c. 5.33% decrease in quantity demanded. d. 0.19% decrease in quantity demanded.

a. 3% decrease in quantity demanded.

Which of the following choices correctly illustrates how changes in opportunity costs affect supply? a. A farmer produces corn and wheat. The price of wheat rises, so he shifts his resources toward wheat and the supply of wheat rises. b. A fisherman fishes for lobsters and oysters. The price of lobsters rises, so she decides to spend more of her time fishing for oysters because she can make the same amount of money with fewer lobsters. c. A textbook for economics becomes cheaper, so more students opt to buy that particular textbook. d. Milk and cereal are complementary goods, so when the price of cereal falls, the quantity supplied of milk rises.

a. A farmer produces corn and wheat. The price of wheat rises, so he shifts his resources toward wheat and the supply of wheat rises.

Which statement is TRUE regarding the figure? a. At a price of $6 per unit, consumers are willing and able to buy 10 units. b. The maximum price demanders are willing to pay for 15 units is $6 per unit. c. The higher the price, the greater the quantity demanded. d. At a price of $3.75 per unit, consumers are indifferent between buying 10 and 15 units. ​

a. At a price of $6 per unit, consumers are willing and able to buy 10 units.

A growing number of utility companies are using drones for site inspections. What is the effect of these changes on the equilibrium price and quantity, in the market for drones? a. Both the equilibrium price and the equilibrium quantity will rise. b. The equilibrium price falls, and the equilibrium quantity rises. c. The equilibrium price rises and the equilibrium quantity falls. d. The equilibrium price rises and the change in equilibrium quantity is ambiguous.

a. Both the equilibrium price and the equilibrium quantity will rise.

which of the following statements is TRUE? a. Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and its market price. b. Bill is willing to pay $10 for a pound of clay. If he buys a pound of clay at a market price per pound of $5, his consumer surplus is $2. c. Total consumer surplus is represented graphically by the area beneath the demand curve. d. Total consumer surplus is represented graphically by the area above the demand curve.

a. Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and its market price.

Consider your decision to attend class each day or skip it. Which of the four core principles of economics applies to the notion that attending class will most likely help you understand the material better and perform well on future exams? a. Cost-benefit principle b. Opportunity cost principle c. Marginal principle d. Interdependence principle e. Professor Baier is BORING principle

a. Cost-benefit principle

Which of the following is TRUE about demand curves? a. Demand curves are negatively sloped. b. Demand curves are U-shaped. c. Demand curves are positively sloped. d. Demand curves are vertical.

a. Demand curves are negatively sloped.

Suppose there is an increase in demand in a market and no change in supply. What will happen to the market equilibrium price and quantity? a. Equilibrium price will rise; equilibrium quantity will rise. b. Equilibrium price will rise; equilibrium quantity will fall. c. Equilibrium price will fall; equilibrium quantity will rise. d. Equilibrium price will fall; equilibrium quantity will fall.

a. Equilibrium price will rise; equilibrium quantity will rise.

(Figure: Market for Coffee) A coffee shop opens next to an existing coffee shop. Which of the following graphs shows the effect of this new coffee shop on the market supply curve for coffee in this area? ​ a. Graph A b. Graph B c. Graph C d. Graph D

a. Graph A

(Figure: Market for Tropicana Juices) Tropicana produces both orange juice and tropical juice blends. What will happen to the supply of Tropicana orange juice when the opportunity cost of producing tropical juice blends rises, and the opportunity cost of producing orange juice stays the same? (Hint: Opportunity costs are part of a producer's marginal cost.) ​ a. Graph A b. Graph B c. Graph C d. Graph D

a. Graph A

After adjusting for inflation, a comparison of the price of leg warmers reveals that the price was significantly higher in the 1980s than it is today. Which of the following can explain this? a. Since the 1980s jeans, leggings, and jeggings have become preferable to leg warmers, decreasing the demand for leg warmers. b. New regulation on the importing of leg warmers made abroad decreased the supply of leg warmers to the United States. c. An increase in the price of cotton used to make leg warmers has led to a decrease in the price of leg warmers today. d. The expected increase in the price of yarn has led to a decrease in the price of leg warmers today. ​

a. Since the 1980s jeans, leggings, and jeggings have become preferable to leg warmers, decreasing the demand for leg warmers.

If a market has a surplus, how will the market respond? a. The price will fall and the quantity supplied will fall. b. The price will fall and the quantity supplied will rise. c. The price will rise and the quantity supplied will fall. d. The price will rise and the quantity supplied will rise.

a. The price will fall and the quantity supplied will fall.

Which of the following explains why a seller might charge a high price when a new video game console is first released and then lower the price as time goes by? a. The seller can charge a high price to consumers who want to be the first ones to own a newly released product. b. The seller wants to test the market to see how consumers react to the product. c. The buyers want to buy the new video game console only if the price is high because a high price signals good quality. d. The seller has to sell the newly released video game console at the government-mandated price.

a. The seller can charge a high price to consumers who want to be the first ones to own a newly released product.

The COVID-19 pandemic caused many gyms to close down for good. The supply and demand model would predict which of the following events in the gym membership market? a. The supply of gym memberships would decrease, resulting in a higher equilibrium price and a lower equilibrium quantity. b. The supply of gym memberships would increase, resulting in a lower equilibrium price and a higher equilibrium quantity. c. The demand for gym memberships would decrease, resulting in a lower equilibrium price and a lower equilibrium quantity. d. The demand for gym memberships would decrease, resulting in a lower equilibrium price and an uncertain change in equilibrium quantity. ​

a. The supply of gym memberships would decrease, resulting in a higher equilibrium price and a lower equilibrium quantity.

At the competitive market equilibrium, the buyers who purchase the product have the highest willingness to pay. a. True b. False

a. True

If a frost destroys half of the orange crop in Florida, the equilibrium price of oranges will rise. a. True b. False

a. True

If the price of a good increases from $200 to $250 and quantity supplied increases from 200 units to 400 units, the supply will be classified as elastic. a. True b. False

a. True

Similar to the elasticity of demand, the elasticity of supply tends to become more elastic in the long run. a. True b. False

a. True

The elasticity of demand measures how responsive consumers are to price changes. For example, when a small decrease in price leads to a large increase in quantity demanded, demand is considered elastic. a. True b. False

a. True

If the income elasticity of demand of a good is positive, we can conclude that the good is: a. a normal good. b. an inferior good. c. a substitute. d. a complement.

a. a normal good.

Imagine a free market in equilibrium. After a sudden decrease in supply (but before the price can adjust), the market experiences: a. a shortage. b. a surplus. c. its initial equilibrium. d. a new equilibrium.

a. a shortage.

In a competitive market: a. buyers compete with other buyers, and sellers compete with other sellers. b. buyers compete with sellers, and sellers compete with buyers. c. sellers alone determine the equilibrium price. d. buyers alone determine the equilibrium price.

a. buyers compete with other buyers, and sellers compete with other sellers.

The marginal principle breaks quantity decisions into iterative decisions that use the a. cost-benefit principle. b. opportunity cost principle. c. interdependence principle. d. sunk cost evaluation.

a. cost-benefit principle.

Compared to S1, S2 is more: a. elastic since quantity supplied increases more with an increase in price. b. elastic since quantity supplied increases less with an increase in price. c. inelastic since quantity supplied increases more with an increase in price. d. inelastic since quantity supplied increases less with an increase in price. ​

a. elastic since quantity supplied increases more with an increase in price.

The supply curve: a. illustrates the quantity supplied at different prices. b. shows the relationship between the number of units purchased and the number of units produced. c. gives the maximum price that sellers may charge for a good and the quantity supplied. d. shows a negative relationship between price and output.

a. illustrates the quantity supplied at different prices.

In 1980, when Iraq attacked Iran, the price of oil _____ because of a(n) _____. a. increased; disruption in the supply of oil b. increased; decrease in the demand for oil c. fell; increased demand for oil d. fell; increased quantity of oil supplied

a. increased; disruption in the supply of oil

An increase in a per unit production subsidy: a. increases supply. b. decreases supply. c. does not change supply. d. changes supply in an indeterminate direction.

a. increases supply.

A good is considered normal if demand for it _____ when income _____. a. increases; increases b. decreases; increases c. stays the same; decreases d. increases; decreases

a. increases; increases

The long-run demand for oil _____ the short-run demand for oil. a. is more elastic than b. is less elastic than c. is equally elastic to d. differs in elasticity in an indeterminate direction compared with

a. is more elastic than

Based on the ideas of Adam Smith, it is _____ barbers wash, cut, and style hair, but _____. a. not out of benevolence that; from their regard for their own self-interest b. out of benevolence that; sometimes from their regard for their own self-interest c. not out of self-interest that; out of their benevolence d. from charity and good will that; only if they can charge high prices

a. not out of benevolence that; from their regard for their own self-interest

Total revenue is: a. price × quantity. b. quantity/price. c. the elasticity of demand × price. d. price + quantity.

a. price × quantity.

A free market achieves an equilibrium price and quantity due to: a. the combined actions of buyers and sellers. b. increased competition among sellers. c. government regulations placed on market participants. d. buyers' ability to affect market outcomes.

a. the combined actions of buyers and sellers.

Producer surplus is: a. the difference between the market price and the minimum price at which producers are willing to sell a good. b. the amount at which producers are willing to sell a good. c. the amount at which producers sell a good. d. the amount at which producers are willing to sell a good plus the amount at which they sell it.

a. the difference between the market price and the minimum price at which producers are willing to sell a good.

The better Martha Stewart is at running her business: a. the higher her opportunity cost of ironing her own shirts. b. the lower her opportunity cost of ironing her own shirts. c. the more it makes sense for her to iron her own shirts because she will have more time. d. the more it makes sense for her to spend her time away from her business.

a. the higher her opportunity cost of ironing her own shirts.

The law of demand states that: a. the lower the price, the greater the quantity demanded. b. the higher the price, the higher the quantity demanded. c. the demand curve slopes upward. d. an increase in income increases the quantity demanded.

a. the lower the price, the greater the quantity demanded.

The opportunity cost of a choice is: a. the value of the opportunities lost. b. the net value of the opportunities gained. c. the difference between the benefits and costs of the choice. d. sometimes positive or negative.

a. the value of the opportunities lost.

If a store runs a sale on a product to clear out its stock, we can conclude that: a. there was a surplus of the product in the store. b. there was a shortage of the product in the store. c. the demand for the product is larger than the supply of the product. d. the product must be very close to its expiration date.

a. there was a surplus of the product in the store.

An increase in demand shifts the demand curve: a. up and to the right. b. down and to the right. c. up and to the left. d. down and to the left.

a. up and to the right.

When you are willing to pay $5 for a hamburger but you pay $4 for it, your consumer surplus for the hamburger is: a. -$1. b. $1. c. -$9. d. $9.

b. $1.

The value of wasted resources at a quantity of 80 units is: a. $800. b. $900. c. $600. d. $200.

b. $900.

The price elasticity of supply between point A and point B is: a. 10. b. 1. c. 5. d. 2. ​

b. 1.

The price elasticity of supply between point C and point D is: a. 10. b. 1. c. 5. d. 0.2. ​

b. 1.

Mark considers 3-D archery and shooting trap substitute activities for each other. As the price of shooting trap increases, Mark's demand to participate in: a. 3-D archery decreases. b. 3-D archery increases. c. shooting trap increases. d. both activities decreases.

b. 3-D archery increases

How did the spread of the Internet affect the market for newspapers? a. Demand increased, causing the price to rise. b. Demand decreased, causing the price to fall. c. Supply decreased, causing the price to rise. d. Supply increased, causing the price to fall.

b. Demand decreased, causing the price to fall.

If the demand for a good is elastic, then: a. revenues increase when the price goes up. b. revenues decrease when the price goes up. c. any change in price is matched by an equal and opposite percentage change in quantity, so revenues stay the same. d. revenues decrease regardless of the direction of the price change.

b. revenues decrease when the price goes up.

If supply decreases, ceteris paribus, the quantity exchanged will be _____ at the new market equilibrium point. a. larger b. smaller c. the same d. either larger or smaller

b. smaller

If Clemson University President Jim Clements valued a parking space close to the Sikes Hall at $1500 and paid $900 for a parking permit, he would receive consumer surplus equal to: a. $1500. b. $1200. c. $ 900, d. $ 600 e. $ 300

d. $ 600

The United Nations estimates that Earth's population growth rate will slow down by the year 2050, at which time population may start to decrease. If technological change allows the supply of oil to increase at a constant rate, and nothing else changes, what effect will a slowdown in population growth have on the price of oil? a. Demand will increase during this period, and the price of oil will continue to increase beyond 2050. b. Demand will increase more slowly during this period, but since supply is growing at a constant rate, the rate of price increase will fall, and ultimately the price of oil may begin to fall. c. Demand will increase, raising the quantity supplied. Since the quantity supplied will increase, the price must go down. d. The supply of oil will fall and prices will rise.

b. Demand will increase more slowly during this period, but since supply is growing at a constant rate, the rate of price increase will fall, and ultimately the price of oil may begin to fall.

42. When the price of a good goes down, demand for the good goes down. a. True b. False

b. False

If Tesla cars become less expensive, what will happen in the market for other electric cars? a. The quantity demanded of Teslas will fall. b. The demand for other electric cars will fall. c. The demand for other electric cars will rise. d. The quantity demanded of Teslas will not change.

b. The demand for other electric cars will fall.

Five new sellers enter a market (that previously had seven) and begin producing a good. Which of the following choices explains what happens to the equilibrium Q and P? a. The demand curve will shift to the right, and the equilibrium P and Q will both rise. b. The supply curve will shift to the right, the equilibrium P will fall, and the equilibrium Q will rise. c. The supply curve will shift to the left, the equilibrium P will fall, and the equilibrium Q will rise. d. The supply curve will shift to the right, the equilibrium P will rise, and the equilibrium Q will fall.

b. The supply curve will shift to the right, the equilibrium P will fall, and the equilibrium Q will rise.

The Bangtan Boys (BTS) sold out their first US concert, almost as soon as the tickets became available. Moreover, tickets for the BTS tour were, on average, twice as expensive as tickets for Taylor Swift's 2018 Reputation tour. How can you explain this difference in ticket prices? a. Consumers must prefer BTS to Taylor Swift. b. There is a shortage of BTS tickets compared to Taylor Swift tickets. c. The supply of BTS tickets is larger than the supply of Taylor Swift tickets. d. The demand for BTS tickets is larger than the demand for Taylor Swift's tickets.

b. There is a shortage of BTS tickets compared to Taylor Swift tickets.

In the market for fertilizer, an: a. increase in the wage rate will increase the demand for fertilizer. b. advance in technology will increase the supply of fertilizer. c. increase in the wage rate will increase the supply of fertilizer. d. increase in the cost of equipment will increase the supply of fertilizer.

b. advance in technology will increase the supply of fertilizer.

Suppose Clemson University decides to increase its enrollment by 50 percent over the next five years in order to increase tuition revenue. Which of the following would most likely occur in the market for rental housing in the surrounding community? a. a decrease in the price of rental housing b. an increase in the demand for rental housing c. a decrease in the supply of rental housing d. a change in quantity demanded, not demand (because this is the result of a change in population) e. All of the above.

b. an increase in the demand for rental housing

Which of the following are likely to be complements? a. hot dogs and hamburgers b. books and book-lights c. coffee and tea d. cars and vans

b. books and book-lights

The main difference between Saudi Arabian oil production and U.S. oil production is the: a. quantity of production. b. cost of production. c. quality of the product. d. price of the product.

b. cost of production.

When markets don't align self-interest with social interest: a. markets will still manage to reach an efficient outcome. b. governments may improve the situation by changing incentives. c. societal costs will always exceed individual benefits. d. individual benefits will exceed societal benefits.

b. governments may improve the situation by changing incentives.

In competitive markets, shortages lead to: a. lower prices. b. higher prices. c. surpluses. d. unexploited gains from trade. ​

b. higher prices.

Cell phone data plans are most useful when used with a smartphone, and smartphones are most useful when used with a data plan. As the price of data plans falls, the demand for smartphones will: a. decrease because smartphones and data plans are substitutes. b. increase because smartphones and data plans are complements. c. decrease because smartphones and data plans are complements. d. increase because smartphones and data plans are substitutes.

b. increase because smartphones and data plans are complements.

Farmers can produce more milk at lower cost, but Americans want to drink only so much milk. This suggests that the demand curve for milk is: a. elastic. b. inelastic. c. unit elastic. d. unaffected by elasticity.

b. inelastic.

Scarcity: a. is when a resource is completely used up. b. is when there isn't enough to satisfy all our wants. c. happens only in a few economies around the world. d. can be fixed with good economic policy.

b. is when there isn't enough to satisfy all our wants.

For suppliers to sell more than the equilibrium quantity, it would mean that: a. it costs suppliers less to produce the good than its value to buyers. b. it costs suppliers more to produce the good than its value to buyers. c. the gains from trade increase. d. suppliers gain from trade while buyers are unaffected.

b. it costs suppliers more to produce the good than its value to buyers.

Asking "Or what?" allows the _____ principle to be analyzed as a simple question. a. cost-benefit b. opportunity cost c. marginal d. interdependence

b. opportunity cost

hich of the following probably has the least elastic demand? a. cable television b. prescription medications c. eggs d. McDonald's hamburgers

b. prescription medications

The key condition for equilibrium to occur in a market is: a. the demand curve equals the supply curve. b. quantity demanded equals quantity supplied. c. price equals quantity. d. demand for one good equals demand for all other goods.

b. quantity demanded equals quantity supplied.

During the Great Recession, many people could not afford to pay their mortgage on their house and and had to move into an apartments or move in with family. This resulted in an increase in the _________ of used homes and a ____ in price. The interdependence principle tells us that the ______ in price of used homes caused a _______ in demand for new home. a. supply, rise, rise, decrease b. supply, fall, fall, decrease c. demand, rise, fall, increase d. demand, fall, rise, increase e. supply, fall, rise, increase f. demand, fall, fall, decrease

b. supply, fall, fall, decrease

In regard to the criminalization of drugs, Nobel Prize-winning economist Gary Becker suggested: a. raising the capital gains tax to help provide more government resources for the war on drugs. b. that the government should make drugs legal and then place a tax on drugs to control their usage. c. subsidizing the consumption of illegal drugs in an effort to avoid deadweight losses. d. All of the answers are correct.

b. that the government should make drugs legal and then place a tax on drugs to control their usage.

It is a rainy day, and you are considering taking an Uber one mile to meet some friends. You have decided you are willing to pay $20 to avoid getting wet from the rain. The trip would normally cost you $8, but due to the weather the surcharge is triple the regular cost. You should _____ because the benefit to you of taking the Uber is _____ than the cost. a. walk; less b. walk; more c. take an Uber; less d. take an Uber; more

b. walk; more

At a price of $200, consumer surplus is: a. $20,000. b. $40,000. c. $10,000. d. $200.

c. $10,000.

What is the change in producer surplus if the price rises from $2 to $3 per unit? a. $5 b. $10 c. $15 d. $20 ​

c. $15

What is the equilibrium price per pound in the diagram? a. $4 b. $6 c. $8 d. $10 ​

c. $8

When the demand curve shifts from D0 to D1, the equilibrium price rises to: a. $9 and the equilibrium quantity rises to 120. b. $9 and the equilibrium quantity rises to 160. c. $8 and the equilibrium quantity rises to 140. d. $8 and the equilibrium quantity rises to 160. ​

c. $8 and the equilibrium quantity rises to 140.

The elasticity of demand for oil is about 0.5, and the elasticity of supply is about 0.3. If the Arctic National Wildlife Refuge (ANWR) were drilled and the world supply of oil increased by 3%, what would be the estimated percentage change in the world price of oil? a. -1.25% b. -2.50% c. -3.75% d. unknown

c. -3.75%

The equilibrium quantity (in units) is: a. 8. b. 10. c. 16. d. 12. ​

c. 16.

If hipsters decide that Bush Light Apple has become the beverage that all the cool people are drinking, what will happen in the market for Natural Light's Naturdays? a. Demand will decrease, quantity demanded will decrease, and price will increase. b. Supply will decrease, quantity demanded will decrease, and price will decrease. c. Demand will decrease, quantity supplied will decrease, and price will decrease. d. Demand will decrease, quantity supplied will increase, and price will decrease. ​ e. There is not enough information to solve this problem.

c. Demand will decrease, quantity supplied will decrease, and price will decrease.

If the price of Netflix decreases, what will happen in the market for Hulu? a. Demand will decrease, quantity demanded will decrease, and price will increase. b. Supply will decrease, quantity demanded will decrease, and price will decrease. c. Demand will decrease, quantity supplied will decrease, and price will decrease. d. Demand will decrease, quantity supplied will increase, and price will decrease.

c. Demand will decrease, quantity supplied will decrease, and price will decrease.

In 2011, Japan suffered a major earthquake and tsunami. Honda parts that were sourced from Japan could no longer be produced, which caused Honda to cut its production of cars. Which graph shows the effect of this shortfall? a. Graph A b. Graph B c. Graph C d. Graph D

c. Graph C

If prices rise, what happens to producer surplus (all other things being equal)? a. It falls because fewer people buy goods. b. It falls because it encourages competition, which reduces profits. c. It rises because each producer is getting more surplus per good sold. d. It stays the same because the forces increasing the surplus counteract the forces reducing it.

c. It rises because each producer is getting more surplus per good sold.

The COVID-19 pandemic caused many consumers to be quarantined in their homes. The supply and demand model would predict which of the following events in the market for craft supplies sold by online craft stores? a. The supply of craft supplies sold by online retailers would decrease, resulting in a higher equilibrium price and a lower equilibrium quantity. b. The supply of craft supplies sold by online retailers would increase, resulting in a lower equilibrium price and a higher equilibrium quantity. c. The demand for craft supplies sold by online retailers would increase, resulting in a higher equilibrium price and a higher equilibrium quantity. d. The demand for craft supplies sold by online retailers would decrease, resulting in a lower equilibrium price and a lower equilibrium quantity.

c. The demand for craft supplies sold by online retailers would increase, resulting in a higher equilibrium price and a higher equilibrium quantity.

Which of the following is NOT a factor that can shift supply? a. The expected future price of a product. b. The price of a substitute-in-production. c. The market price of a product. d. The price of a complement-in-production.

c. The market price of a product.

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment. What is the most likely reason why? a. The opportunity cost of going to graduate school is high when jobs are difficult to find. b. When jobs are easy to find, there are strong incentives to go to grad school. c. The opportunity cost of going to graduate school is low when jobs are hard to find. d. Even if you have a job, the salary will be so low that going to graduate school is worth the effort.

c. The opportunity cost of going to graduate school is low when jobs are hard to find.

What effect did the 1997 East Asian recession in countries such as South Korea, Indonesia, and Thailand have on the oil market? a. The recession decreased income, made the world more dependent on oil, and increased oil demand and prices. b. The recession led to high unemployment and reduced the demand for driving and the supply of oil. c. The recession decreased income and reduced the demand for oil and oil prices. d. The recession led to high unemployment, increased demand for Sunday driving, and increased oil prices.

c. The recession decreased income and reduced the demand for oil and oil prices.

It costs suppliers $1 to produce each additional widget, and widgets sell for $2. Some consumers are not willing to pay $2 for a widget but are nevertheless willing to pay more than $1. Which of the following statements is TRUE? a. The market is at equilibrium. b. Suppliers must be reaping big profits. c. There are unexploited gains from trade. d. Consumers will bid up prices.

c. There are unexploited gains from trade.

Mario buys 8 units of good X when his income is $2,000 a month. When his income increases to $2,700 per month, he buys only 6 units of good X. For Mario, good X is: a. a normal good. b. a good with few substitutes. c. an inferior good. d. a good of high value.

c. an inferior good.

In his book The Wealth of Nations, Adam Smith claimed that individuals: a. always act in an altruistic way. b. always consider the effect of their actions on others. c. are motivated by self-interest. d. are not concerned with resources. ​ e. All of the above.

c. are motivated by self-interest.

The opportunity cost of winning four free tickets to the Boston College vs Clemson Homecoming game is worth $320 (on Stub-Hub) and choosing to attend the game is: a. zero, since the tickets was free. b. priceless, if the person really loves Clemson football. c. at least $320, the lost market value of selling the ticket, and the time to go. d. zero, if the person would rather go to the game than do anything else. ​ e. All of the above.

c. at least $320, the lost market value of selling the ticket, and the time to go.

When the price of a good increases, demand for the good will: a. increase. b. decrease. c. be unaffected. d. depend on the corresponding change in supply.

c. be unaffected.

For each good produced in a free market economy, demand and supply determine: a. the price of the good, but not the quantity. b. the quantity of the good, but not the price. c. both the price and the quantity of the good. d. neither price nor quantity; sellers determine the price.

c. both the price and the quantity of the good.

The movie trilogy The Lord of the Rings was hugely successful, and, as a result, the demand for fantasy novels, action figures, and online role-playing games surged. The increase in demand can be explained by a(n): a. increase in population. b. change in expectations. c. change in tastes. d. change in the price of substitutes.

c. change in tastes.

According to the figure, the: a. costs of producing output have decreased. b. technology for producing output has improved. c. costs of producing output have increased. d. price of the product has decreased. ​

c. costs of producing output have increased.

Recently, China announced that it would attempt to crack-down on the use of bitcoin and other cryptocurrencies for buying and selling goods. We would expect this to a. increase the demand for bitcoin and cryptocurrencies. b. increase the supply for bitcoin and cryptocurrencies. c. decrease the demand for bitcoin and crypto currencies. d. decrease the supply for bitcoin and cryptocurrencies.

c. decrease the demand for bitcoin and crypto currencies.

43. Nobel Prize-winning economist Gary Becker suggested that prohibited drugs should be legalized and then taxed. This would _____ the seller's cost and _____ government revenue. a. decrease; decrease b. decrease; increase c. increase; increase d. increase; decrease

c. increase; increase

A 4% increase in the price of beer will cause a 1% decline in the quantity of beer demanded. The demand for beer is: a. elastic. b. unitary elastic. c. inelastic. d. elastic at 4 (in absolute value).

c. inelastic.

Which variable is NOT a demand shifter? a. price of complements b. price of substitutes c. price of raw materials d. tastes and preferences

c. price of raw materials

If the price of the product is $14, there is a: a. shortage of 30 units of the product, and the price will rise to $16. b. surplus of 20 units of the product, and the price will rise to $16. c. shortage of 50 units of the product, and the price will rise to $16. d. surplus of 40 units of the product, and the price will rise to $16. ​

c. shortage of 50 units of the product, and the price will rise to $16.

When supply decreases, there is a _____ at the old equilibrium price, which puts _____ pressure on price until the market reaches the new equilibrium. a. surplus; downward b. surplus; upward c. shortage; upward d. shortage; downward

c. shortage; upward

Gains from trade are maximized when: a. the market price is higher than the equilibrium price. b. the market price is less than the equilibrium price. c. the market price is equal to the equilibrium price. d. there are additional potential trades available that have not been completed.

c. the market price is equal to the equilibrium price.

Every day, people work at serving people meals at restaurants all around the world. These people work for our benefit because: a. people think on the margin. b. trade-offs are everywhere. c. they benefit by doing so. d. institutions require them to do so.

c. they benefit by doing so.

Mark Zuckerberg dropped out of college and founded Facebook. His opportunity cost of attending college was: a. tuition, the cost of books, and room and board. b. tuition, the cost of books, and a low-paying job. c. tuition, the cost of books, and the income from his Facebook pursuits. d. only the income from his Facebook pursuits.

c. tuition, the cost of books, and the income from his Facebook pursuits

During the Great Recession of 2007-2009, unemployment shot up and a lot of people lost their jobs. All over the United States, people worried about job security. Which of the following do you think happened as a result of the Great Recession? (i) Consumers ate out less often. (ii) Consumers purchased fewer higher-end vehicles. (iii) Purchases of new housing went down. (iv) Consumers took fewer vacations outside the United States. a. (i), (ii) and (iv) are correct. b. (i) and (iv) are correct. c. (ii) and (iii) are correct. d. (i), (ii), (iii) and (iv) are all correct.

d. (i), (ii), (iii) and (iv) are all correct.

The elasticity of demand for watermelons is -1.5. A 4% increase in the price will cause a: a. 3% decrease in quantity demanded. b. 3% increase in quantity demanded. c. 6% increase in quantity demanded. d. 6% decrease in quantity demanded.

d. 6% decrease in quantity demanded.

(Figure: Leather Wallets) Fossil has started an aggressive advertising campaign for its wallets. Which graph shows how the demand in the market might change if the advertising campaign is successful? ​ a. Graph A b. Graph B c. Graph C d. Graph D

d. Graph D

Vincent Pearson makes dining tables, and he is trying to decide how many tables to produce. He can sell each dining table for $1,000. The cost of the first table is $500, for the second it's $700. For each additional table he produces, the marginal cost of each table increases by $200. How many dining tables should Vincent produce, and what is the total cost of his production? a. Vincent will not make any tables. b. He will produce one table at a cost of $500. c. He will produce two tables at a cost of $1.200 d. He will produce three tables at a cost of $2,100. e. He will produce four tables at a cost of $3,000

d. He will produce three tables at a cost of $2,100

Joe runs a landscape company and uses one of the bedrooms in his home as a home office. This office could be used to earn rental income from college students. If average rental income in Joe's neighborhood were to rise: a. Joe's opportunity cost of using a bedroom as a home office would decrease. b. Joe's landscape company would experience a decrease in demand for services at all prices. c. Joe should expand his office space in his home. d. Joe's opportunity cost of using a bedroom as a home office would increase.

d. Joe's opportunity cost of using a bedroom as a home office would increase.

In the figure, the initial demand curve is D1 and the initial supply curve is S1. Resource prices in this market increase; at the same time, the consumer population declines as migration causes an outflow of population to other regions. What happens to the supply curve and/or demand curve? a. S1 shifts to S2, but then shifts back to S1. D1 remains at D1. b. S1 shifts to S3, and D1 shifts to D2. c. S1 shifts to S2, and D1 shifts to D3. d. S1 shifts to S2, and D1 shifts to D2. ​

d. S1 shifts to S2, and D1 shifts to D2.

A market can be described by the equations Qd = 50 - 3P and Qs = 2P. What are the equilibrium price and quantity in this market? a. The equilibrium price is $20, and the equilibrium quantity is 10 units. b. The equilibrium price is $50, and the equilibrium quantity is 100 units. c. The equilibrium price is $30, and the equilibrium quantity is 10 units. d. The equilibrium price is $10, and the equilibrium quantity is 20 units.

d. The equilibrium price is $10, and the equilibrium quantity is 20 units.

What will happen in the market for cotton as a result of a severe drought? a. The demand for cotton will decrease, causing the equilibrium price to fall and equilibrium quantity to fall. b. The demand for cotton will increase, causing the equilibrium price to rise and equilibrium quantity to rise. c. The supply of cotton will decrease, causing the equilibrium price to fall and equilibrium quantity to fall. d. The supply of cotton will decrease, causing the equilibrium price to rise and equilibrium quantity to fall.

d. The supply of cotton will decrease, causing the equilibrium price to rise and equilibrium quantity to fall.

If the government institutes a tax on suppliers of Cheesy-Poofs, the market for Cheesy-Poofs will see: a. a decrease in demand, a decrease in quantity supplied, and an increase in price. b. an increase in supply, a decrease in quantity supplied, and an increase in price. c. a decrease in supply, an increase in quantity demanded, and an increase in price. d. a decrease in supply, a decrease in quantity demanded, and an increase in price.

d. a decrease in supply, a decrease in quantity demanded, and an increase in price.

A decrease in the price of one substitute good causes: a. an upward movement along the demand curve for the other substitute good. b. a downward movement along the demand curve for the other substitute good. c. a rightward shift in the demand curve for the other substitute good. d. a leftward shift in the demand curve for the other substitute good.

d. a leftward shift in the demand curve for the other substitute good.

The basic postulate of economics indicates that changes in incentives influence the: a. actions of producers but not consumers. b. actions of consumers but not producers. c. choices of individuals only when they buy and sell goods in the marketplace. d. choices of individuals with regard to a wide range of activities, including those generally perceived as social or political.

d. choices of individuals with regard to a wide range of activities, including those generally perceived as social or political.

When there is a shortage, sellers have an incentive to _____ their price and buyers have an incentive to offer a _____ price. a. increase; lower b. decrease; lower c. decrease; higher d. increase; higher

d. increase; higher

South Korea became much richer than North Korea as a result of: a. foreign aid from the United States. b. a different cultural background. c. a different language. d. its economic systems and incentives.

d. its economic systems and incentives.

Paul is a wheat farmer in a perfectly competitive market. The market price of wheat is $250 per ton. If Paul charges $245 per ton, he will a. not sell any wheat. b. raise his profitability by $5 per ton. c. sell less wheat than other farmers. d. lower his profitability by $5 per ton. e. None of the above.

d. lower his profitability by $5 per ton.

Suppose a certain business wants to encourage its employees to live healthier lives. The easiest way for the business to realize this goal is to: a. give each employee $100 a month for a gym membership. b. install a gym in the office building. c. reduce health insurance benefits. d. pay a monthly bonus to employees who log an hour of exercise a week on a fitness tracker.

d. pay a monthly bonus to employees who log an hour of exercise a week on a fitness tracker.

A demand curve shows the relationship between: a. quantity demanded and quantity supplied, which are positively related. b. quantity demanded and quantity supplied, which are negatively related. c. price and quantity demanded, which are positively related. d. price and quantity demanded, which are negatively related.

d. price and quantity demanded, which are negatively related.

In the early 1980s, movie rentals averaged $5 a night; by the early 1990s, that average was $1 per night. This is an example of a supply curve shifter based on: a. a change in tastes and preferences. b. a decrease in the wages of workers in the video rental stores. c. an increase in the number of VCRs owned by consumers. d. the entry of new suppliers into the market. ​

d. the entry of new suppliers into the market.

Cedar Point amusement park reduces its entry fees. As a result of this price fall, a. the demand will decrease. b. the quantity demanded will be smaller. c. the demand will rise. d. the quantity demanded will be higher.

d. the quantity demanded will be higher

When the price of a good equals the equilibrium price: a. there will still be some wasted resources. b. gains from trade are minimized. c. opportunity cost is minimized. d. there are no unexploited gains from trade.

d. there are no unexploited gains from trade.

In a competitive market in which an equilibrium price and quantity prevail: a. consumer surplus is less than producer surplus. b. consumer surplus is greater than producer surplus. c. consumer surplus is the same as producer surplus. d. total surplus are maximized. ​ e. consumer surplus is more than 50 percent of total surplus.

d. total surplus are maximized.

What area represents the value of wasted resources from trade when the price is set at J? a. triangle AGM b. triangle CGL c. triangle AEG d. triangle DGK ​

d. triangle DGK