Microeconomics - Chapters 1 - 6

An example of a demand shifter is: a) factor prices b) technology c) consumer preferences d) producer expectations

c) consumer preferences

If the quantity supplied in a market exceeds the quantity demanded in a market, we would expect price to: a) stay the same b) increase c) decrease d) rise in order to clear the market

c) decrease

Ceteris paribus of outside variables is assumed: a) when the curve on a graph shifts b) at all times when dealing with variables in economics c) during movement along a curve on a graph d) none of the above

c) during movement along a curve on a graph

When the percentage change in quantity demanded is larger than the percentage change in price, demand is said to be: a) inelastic. b) unit elastic. c) elastic. d) perfectly inelastic.

c) elastic.

Net benefits are important to consider when: a) deciding if to use ceteris paribus b) making assumptions c) evaluating alternate choices d) none of the above

c) evaluating alternate choices

The percentage change in quantity demanded divided by the percentage change in income, all other things unchanged, is: a) price elasticity of demand. b) quantity elasticity of demand. c) income elasticity of demand. d) cross-price elasticity of demand.

c) income elasticity of demand

Whenever MB > MC, the decisionmaker should do _______ of the activity: a) less b) the same amount c) more d) none

c) more

For most goods, purchases tend to rise with increases in buyers' incomes and fall with decreases in buyers' incomes. Such goods are known as: a) inferior goods b) direct goods c) normal goods d) luxury goods

c) normal goods

The exhibit shows how supply and demand might shift in response to specific events. suppose scientists discover that eating a tomato a day prevents aging. which panel best describes how this will affect the market for tomatoes? a) panel (a) b) panel (b) c) panel (c) d) panel (d)

c) panel (c)

Utility is the: a) difference between a firm's total revenue and its total economic cost. b) good not adequately provided by a free market and usually provided by the government. c) satisfaction consumers derive from their consumption of goods and services. d) lowest price that buyers are willing to pay for a given quantity of a good.

c) satisfaction consumers derive from their consumption of goods and services.

The "all other things unchanged" assumption is used to: a) express the fundamental question in economics b) approximate real-world conditions c) simplify the very complex real world d) do all of the above

c) simplify the very complex real world

Every day for the past two years you've had ham and cheese on a whole wheat bagel for lunch at Bungalow Bob's Bagel Boutique. However, the price of whole wheat bagels has risen by 10 cents so today you decide to have ham and cheese on a rye bagel. In this case, whole wheat and rye bagels are considered: a) superior goods b) normal goods c) substitute goods d) complementary goods

c) substitute goods

A decrease in supply is caused by: a) a decrease in resource prices b) an increase in the number of seller in the market c) suppliers' expectations of higher prices in the future d) an advancement in the technology for producing the good

c) suppliers' expectations of higher prices in the future

If an economy is at point U, and its production possibilities curve is Curve 1, this would indicate that: a) resources are fully employed b) economic growth has taken place c) there is inefficiency and/ or unemployment d) the economy is maximizing its economic objectives

c) there is inefficiency and/ or unemployment

The theory underlying demand and supply curves assumes that, all other things unchanged, the primary variable that assures the equality of the quantities demanded and supplied is: a) consumer income b) the preferences of consumers c) the expectations of consumers and producers d) price

d) price

When economists study the behavior of sellers, they are studying: a) supply b) the role of government c) demand d) accounting

a) supply

Adam Smith, a scottish economist, established the proposition that individuals should not pursue their own self-interest: a) true b) false

b) false

An output level OE, the total costs to sellers is ____, the total revenues to sellers is ___, and the produces surplus is ____. a) OADE; OBDE; ABD b) OBDE; OADE; ABD c) OADE; OBDE; OAFE d) OBDE; OADE; OAFE

a) OADE; OBDE; ABD

Which of the following is an example of capital? a) a gravel truck b) a savings account c) a share of general motors stock d) a lake

a) a gravel truck

A factor that may have changed supply from S1 to S2 is: a) better technology in the production of gasoline b) increased demand c) lower labor productivity d) increased prices of substitutes for gasoline

a) better technology in the production of gasoline

A decrease in price will lead to an increase in the quantity demanded: a) true b) false

a) true

If demand is price elastic, it is certain that: a) any change in price will decrease total revenue b) a decrease in price will lower total revenue c) an increase in price will lower total revenue d) total revenue is at a maximum

c) an increase in price will lower total revenue

A factor of production that has been produced for use in the production of other goods and services is: a) labor b) money c) capital d) natural resources

c) capital

Which of the following is considered an economic activity? a) the eating of an ice cream cone purchased from a vendor b) the distribution of output among members of society c) manufacturer of cabbage patch dolls d) all of the above

d) all of the above

Economic models are: a) created and used in order to duplicate virtually every aspect of the real world b) useless if they are simple c) made generally of wood, plastic, and/or metal d) built using assumptions

d) built using assumptions

An example of a normative statement is: a) the rate of unemployment is 4 percent b) a high rate of economic growth creates more jobs for the country c) the federal government spends half of its budget on national defense d) everyone in the country needs to be covered by the national health insurance

d) everyone in the country needs to be covered by the national health insurance

A person who mistakenly assumes that because one event follows another, the second event results from the first commits the fallacy of: a) division b) addition c) composition d) false cause

d) false cause

The amount by which an additional unit of an activity increases total cost is: a) net benefit b) marginal benefit c) negative benefit d) marginal cost

d) marginal cost

The exhibit shows how supply and demand might shift in response to a specific events. suppose the technology for producing automotive gasoline improves. which panel best describes how this will affect the market for automotive gasoline? a) panel (a) b) panel (b) c) panel (c) d) panel (d)

d) panel (d)

A hypothesis that has been tested extensively without being rejected and has won widespread acceptance is a: a) model b) constant c) variable d) theory

d) theory

If the United States decides to allocate more resources to capital goods and less to consumer goods, the United States will obtain a greater degree of: a) economic growth b) full employment c) price stability d) technical efficiency

a) economic growth

According to the marginal decision rule, if marginal benefit: a) exceeds marginal cost, an activity should be increased b) is less than marginal cost, an activity should be increased. c) is equal to marginal cost, an activity should be increased. d) exceeds marginal cost, net benefit is maximized.

a) exceeds marginal cost, an activity should be increased

In a market capitalist economy: a) factors of production are owned privately and decisions about their use are basically made by individuals b) factors of production are owned by the government but decisions about their use are made privately d) there is no role for the government

a) factors of production are owned privately and decisions about their use are basically made by individuals

In market capitalism: a) factors of production are privately owned and decisions are made privately b) factors of production are owned by the government but decisions are made privately c) there is no role for government d) the consumer has few choices to make

a) factors of production are privately owned and decisions are made privately

Variables that are correlated: a) follow a pattern which may or may not mean one causes the other to change b) indicates that a change in one variable causes the other change c) are not important in the advancement of knowledge

a) follow a pattern which may or may not mean one causes the other to change

If demand is unit price elastic, a change in price causes: a) no change in total revenue. b) a decrease in total revenue. c) a change in total revenue in the opposite direction. d) an increase in total revenue.

a) no change in total revenue.

The key signals that send messages to buyers and sellers to buy or not to buy or to sell or not to sell are, all other things unchanged: a) prices b) preferences c) government mandates d) expectations

a) prices

The intersection of the supply and demand curves indicates: a) the equilibrium solution in the market b) a surplus that will cause the price to fall c) a shortage that will cause the price to rise d) the quantity demanded exceeds the quantity supplied

a) the equilibrium solution in the market

If the economy were producing 8 units of guns and 12 units of butter per period: a) this is a possible choice, but would involve unemployment and/or inefficiency b) the notion of increasing opportunity cost in invalidated c) the economy is still efficient but has made a decision not to but as much as it could d) something must be done to reduce the amount of employment

a) this is a possible choice, but would involve unemployment and/or inefficiency

Economic policy involves facts and value judgement. a) true b) false

a) true

A demand curve that is perfectly inelastic: a) will be vertical. b) will be horizontal. c) will be upward sloping. d) has an elasticity equal to 1 everywhere on the curve.

a) will be vertical.

Starting at point A, the opportunity cost of producing each successive unit of tractors is: a) a constant 2 units of bread b) 2, 4, 6 and 8 units of bread c) 8, 6, 4 and 2 units of bread d) none of the above

b) 2, 4, 6 and 8 units of bread

What is the equilibrium quantity? a) 3 b) 6 c) 9 d) 12

b) 6

In panel (b), if the activity level is at E, then there will be a deadweight loss shown by the area: a) EGC b) FGC c) ABC d) AFE

b) FGC

The economy will experience its least growth by operating at point: a) N b) P c) Q d) R

b) P

An example of capital is: a) cash b) a factory building c) money in a checking account d) the existing state of technology

b) a factory builiding

If the price of mozzarella cheese (an ingredient in pizza) declines due to major technological breakthroughs in the dairy industry, there would be: a) a decrease in the supply of pizza (shift) b) an increase in the supply of pizza (shift) c) an increase in the quantity of pizza supplied (movement along) d) no change in the supply of pizza

b) an increase in the supply of pizza (shift)

A model or theory in economics is: a) based mostly on value judgements b) built using relevant observations, assumptions, and abstractions c) only useful if it correctly portrays the real world and its complexities d) useful only if it based on normative economic statements

b) built using relevant observations, assumptions, and abstractions

When the price of gas goes up and the demand for tires goes down, this means tires and gas are: a) substitutes b) complements c) both expensive d) both inexpensive

b) complements

Which of the following is "not" a step in the scientific method that can be used in the social sciences? a) testing of observations b) controlled or laboratory experiments c) observations of events and outcomes d) development of hypotheses

b) controlled or laboratory experiments

A linear demand curve will have a price elasticity of demand whose absolute value: a) increases as price decreases. b) decreases as price decreases. c) is constant. d) is 1 at all prices.

b) decreases as price decreases.

A variable that responds to a change in another variable is called a(n) ____ variable. a) Independent b) dependent c) theoretical d) all of the above are true

b) dependent

If two goods are substitutes, a decrease in the price of one will result in an increase in demand for the other: a) true b) false

b) false

The scientific method is not used in economics: a) true b) false

b) false

The slope of a line is used as a measure of price elasticity elasticity: a) true b) false

b) false

A shift in a curve on a graph is caused by changes a) in the independent variable on the graph b) in one or more outside variables not on the graph c) the dependent variable on the graph d) none of the above

b) in one or more outside variables not on the graph

A variable that induces a change in another variable is a(n): a) dependent variable b) independent variable c) codependent variable d) constant variable

b) independent variable

In a market capitalist economy: a) markets are not competitive b) individual ownership and decision making are relied upon c) consumers have few choices d) the government owns the factors of production

b) individual ownership and decision making are relied upon

Unemployment and inflation are: a) not relevant in the U.S. economy today b) major topics in macroeconomics c) unique only to capitalistic economies d) very important in the study of microeconomics

b) major topics in macroeconomics

Net benefit can be maximized by equating: a) total benefit to total cost. b) marginal benefit to marginal cost. c) marginal benefit to total cost. d) total benefit to marginal cost.

b) marginal benefit to marginal cost.

Which of the following is NOT true? a) pitfalls to sound reasoning create problems in thinking objectively about economic issues. b) positive economic statements involve opinions and value judgments. c) correlation of two variables does not necessarily mean that one variable caused the other variable to change. d) none of the above.

b) positive economic statements involve opinions and value judgments. (i think)

A price that the government guarantees farmers will receive for a particular crop is a(n): a) price ceiling b) price support c) deficiency price d) export price

b) price support

If economists say, "the price is too high," they mean that: a) quantity demanded is greater than quantity supplied b) quantity supplied is greater than quantity demanded c) the equilibrium price exceeds the current price d) the price of goodwill tend to increase

b) quantity supplied is greater than quantity demanded

If the marginal benefit received from good is less than the marginal cost of production, then: a) society's well-being can be improved if production increases. b) society's well-being can be improved if production decreases. c) society's well-being cannot be improved by changing production. d) the market is producing too little of the goods

b) society's well-being can be improved if production decreases.

An example of a supply shifter is: a) demographic characteristics b) technology c) income d) consumer expectations

b) technology

Which factor is the most important in determining the price elasticity of supply? a) the number of close substitutes b) the time period the producer has to adjust inputs and outputs c) the intensity of the need on behalf of consumers d) the number of alternative uses of the good

b) the time period the producer has to adjust inputs and outputs

Movement along a line on a graph occurs when a change in the dependent variable on the graph is caused by: a) changes in one or more outside variables b) changes in the independent variable and outside variables c) changes in the independent variable "only" because all outside variables are assumed constant or ceteris paribus d) none of the above

c) changes in the independent variable "only" because all outside variables are assumed constant or ceteris paribus

Given a linear demand curve, we would expect that as we move down the curve from left to right that: a) total revenue will fall throughout. b) total revenue will rise throughout. c) total revenue will change depending on the price elasticity, which changes along the curve. d) total revenue will equal zero at the midpoint of the curve.

c) total revenue will change depending on the price elasticity, which changes along the curve.

a linear demand curve will have absolute values of the coefficient of price elasticity that: a) exist only for a portion of the curve; on some portions elasticity cannot be measured. b) are all less than 1. c) are all equal to 1. d) range from less than 1 to greater than 1.

d) range from less than 1 to greater than 1.

Property rights are defined as a set of rules that: a) specify how consumers buy a product b) allows owners to use their property any way they choose c) determine the value of property d) specify the ways in which an owner can use a resource

d) specify the ways in which an owner can use a resource

The observed correlation between baldness and heart disease demonstrates that: a) being bald causes a man to have heart disease b) being bald actually makes heart disease less likely c) bald men are generally unreliable d) there is probably some other factor that causes both baldness and heart disease

d) there is probably some other factor that causes both baldness and heart disease