Chapter 1 Homework

C

A good for which demand increases as income rises is​ ________, and a good for which demand increases as income falls is​ ________. A. a​ substitute; a complement B. a​ complement; a substitute C. a normal​ good; an inferior good D. an inferior​ good; a normal good

B

A production possibilities​ frontier: A. shows how participants in the market are linked. B. shows the maximum attainable combinations of two goods that may be produced with available resources. C. shows how unlimited wants exceed the limited resources available to fulfill those wants. D. shows the market for a good or service. E. shows the act of buying and selling.

A

According to Adam​ Smith, which of the following is necessary for the proper functioning of the market​ system? A. For markets to​ work, people must be free to pursue their​ self-interest. Your answer is correct. B. For markets to​ work, the government should help citizens make the right decisions. C. For markets to​ work, people should take into account how their decisions affect society as a whole. D. For markets to​ work, people and the government need to coordinate their decisions.

B

According to Adam​ Smith, which of the following is the instrument the invisible hand uses to direct economic​ activity? A. financial markets B. prices C. costs D. government regulations

C

According to the law of demandLOADING...​, there is an inverse relationship between price and quantity demanded. That​ is, the demand curve for goods and services slopes downward.​ Why? A. When price​ increases, demand decreases. B. When the price of a good​ increases, consumers purchase complementary goods that are now relatively less expensive. C. When the price of a good​ increases, consumers' purchasing power​ decreases, and they cannot buy as much of the good as they did prior to the price change. Your answer is correct. D. When the price of a good​ increases, consumers' purchasing power​ increases, and they can buy more of the good than they did prior to the price change.

E

After World War II in​ 1945, the United States experienced a​ "baby boom" as birthrates rose and remained high through the early 1960s. In​ 2011, the first members of the baby boom generation became older than 65. What effect will this have on the market for doctors​? As the first baby boomers become older than​ 65, the A. demand curve for doctors will become vertical. B. supply curve for doctors will shift to the right. C. quantity of doctors demanded will increase. D. demand curve for doctors will shift to the left. E. demand curve for doctors will shift to the right.

B

An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More​ specifically, A. the substitution effect is the decrease in quantity demanded because there are fewer consumers and the income effect is the decrease in quantity demanded because consumer incomes failed to increase. B. the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in​ consumers' purchasing power. C. the substitution effect is the decrease in quantity demanded because consumer tastes have changed and the income effect is the decrease in quantity demanded because consumer incomes have fallen. D. the substitution effect is the decrease in quantity demanded because the​ consumers' purchasing power is reduced and the income effect is the decrease in quantity demanded owing to the fact that the product is more expensive relative to other goods.

A

An unexpected frost in the orange groves of California would cause A. a decrease in the supply of orange​ juice, increasing the equilibrium price. B. an increase in the supply of orange​ juice, decreasing the equilibrium price. C. a decrease in the demand for orange​ juice, decreasing the equilibrium price. D. an increase in the demand for orange​ juice, increasing the equilibrium price.

positive

A​ 50-cent-per-pack tax on cigarettes will reduce smoking by teenagers by 12 percent. This represents ____ analysis .

government, households and firms

Centrally planned economies allocate resources based on decisions by ___while market economies answer these questions through decisions made by ___. .

A

If a shortage exists in a​ market, we know that the actual price is A. below the equilibrium​ price, and the quantity demanded is greater than the quantity supplied. B. above the equilibrium​ price, and the quantity supplied is greater than the quantity demanded. C. above the equilibrium​ price, and the quantity demanded is greater than the quantity supplied. D. below the equilibrium​ price, and the quantity supplied is greater than the quantity demanded.

D

Economics is a social science because A. it considers human behavior—particularly ​decision-making behavior. B. it applies the scientific method to the study of the interactions among individuals. C. it is based on studying the actions of individuals. D. all of the above.

D

Economists assume that people are rational in the sense that ___. A. they do not respond to economic incentives B. they generally make the correct choices C. they make decisions based on total, rather than marginal, variables D. they use all available info. as they take actions intended to achieve their goals

A

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when ____. A. marginal benefit equals marginal cost B. marginal benefit is maximized C. marginal cost is zero D. marginal benefit is greater than the marginal cost

B

Evaluate the following​ argument: "Adam​ Smith's analysis is based on a fundamental​ flaw: He assumes that people are motivated by​ self-interest. But this​ isn't true. ​ I'm not​ selfish, and most people I know​ aren't selfish." A. This statement is based on the misconception that​ Smith's analysis provides no role for government guidance. B. This statement is based on the misconception that following your​ self-interest and being selfish are the same thing. C. This statement is based on the misconception that​ Smith's analysis applies to firms and households. D. This statement correctly identifies how​ Smith's analysis ignored charitable acts of giving and benevolence. E. This statement is based on the misconception that​ Smith's analysis applies to every aspect of life.

D

From the list​ below, select the variable that will cause the supply curve to​ shift: A. Consumer income B. Population and demographics C. Prices of related goods D. The cost of raw materials

B

Goods and services that can be used for the same purpose are​ ________, and goods and services that are used together are​ ________. A. normal​ goods; inferior goods B. substitutes; complements C. inferior​ goods; normal goods D. complements; substitutes

E

How can a country gain from specialization and​ trade? A. A country can specialize by using all available resources to produce goods and services to avoid trading with other countries. B. A country can specialize in producing that which is most scarce and then trade for other needed goods and services. C. A country can specialize in producing that for which it has an absolute advantage and then trade for other needed goods and services. D. A country can specialize by using all available resources to invest in capital goods to promote economic growth. E. A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services.

A

If a market system functions​ well, which of the following is necessary for the enforcement of contracts and property​ rights? A. an independent court system B. powerful political connections C. action by government to prevent the exercise of certain property rights D. All of the above.

C

The law of demand is the assertion that A. the demand for a product is negatively related to its price. B. changes in price and changes in quantity demanded move in the same direction. C. the quantity demanded of a product is inversely related to its price. D. the quantity demanded of a product is directly related to its price.

A

If a surplus exists in a​ market, we know that the actual price is A. above the equilibrium​ price, and the quantity supplied is greater than the quantity demanded. B. above the equilibrium​ price, and the quantity demanded is greater than the quantity supplied. C. below the equilibrium​ price, and the quantity demanded is greater than the quantity supplied. D. below the equilibrium​ price, and the quantity supplied is greater than the quantity demanded.

A

In discussing dividing up household​ chores, Emily​ Oster, an economist at the University of​ Chicago, advises​ that: ​"No, you​ shouldn't always unload the dishwasher because​ you're better at​ it." ​Source: Emily​ Oster, "The Wrong Person Is Probably Doing the Dishes in Your​ Home," Slate​, November​ 21, 2012. Even if you are better at unloading the dishwasher than your​ spouse, you​ shouldn't always be the one to unload it because: A. you may be even better at some other household task and must consider the opportunity cost. B. your opportunity cost of unloading the dishwasher is nonexistent. C. absolute advantage is what matters for specialization not comparative advantage. D. your spouse will act as a​ 'free rider' if you do all the work.

A

In economic​ terminology, the inputs used to make goods and services are referred to as A. factors of production. Your answer is correct. B. intangibles. C. durables and nondurables. D. real output.

B

In what ways does a free market economy differ from a centrally planned​ economy? Unlike a free market​ economy, A. centrally planned economies do not use money. B. centrally planned economies have extensive government controls. C. centrally planned economies have no government restrictions. D. centrally planned economies do not trade internationally. E. centrally planned economies have no government.

D

In​ economics, the term capital refers to A. financial resources used by businesses to hire resources. B. the process of raising funds from venture capitalists. C. the difference between a​ firm's assets and its liabilities. D. goods used to produce other goods.

macroeconomic, microeconomic

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

C

Is it possible for a country to have a comparative advantage in producing a good without also having an absolute​ advantage? A country without an absolute advantage in producing a good ______. A. will have a comparative advantage if it produces more efficiently. B. will have a comparative advantage if it devotes more resources toward that​ good's production. C. will have a comparative advantage if it has a lower opportunity cost of producing that good. Your answer is correct. D. will not have a comparative advantage because it has fewer resources. E. will have a comparative advantage if it is able to produce that good at a low total cost.

C

Macroeconomics is the study of ____. A. how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices. B. the economy on a​ state-by-state basis, covering areas affected by the Commerce Clause. C. the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth. D.why the U.S. has spent so much money on wars and government surveillance of its own citizens.

B

Microeconomics is the study of _____. A. how individuals make good decisions for themselves but hurt society. B. how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices. C. the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth. D. how individuals and firms act altruistically to better society.

B

One of the great benefits of trade is A. that it provides society what it desires most in life even if it does not enhance the means for achieving its goals. B. that it makes it possible for society to become better off by increasing its consumption. C. that it makes it possible for society to become better off by increasing its production but not its consumption. D. that it makes it possible for society to become better off if​ individuals, firms, and countries specialize in producing goods and services for which they have an absolute advantage.

A

Opportunity cost is ___. A. the highest valued alternative that must be given up to engage in an activity B. the idea that because of​ scarcity, producing more of one good or service means producing less of another good or service C. when unlimited wants exceed the limited resources available to fulfill those wants D. when consumers and firms use all available information as they act to achieve their goals

B

Prepping for a​ next-day exam over the course of an evening​ (and possibly into the wee hours of test​ day) poses increasing costs since: A. evenings are a less productive time to study compared to daylight hours. B. the longer you choose to study will result in an increase in the number and value of foregone activities. C. tutors charge higher rates after 7 p.m. D. studying productivity declines sharply as the effort extends through the evening.

B

Question content area Part 1 The primary difference between product markets and factor markets is that Part 2 A. product markets produce goods for final sale while the output of factor markets is included in the purchase price of the good itself—factors are not sold. B. product markets are markets for​ goods, while factor markets are markets for factors of production—​labor, ​capital, natural​ resources, and entrepreneurial ability. C. product markets are generally after factor markets in the distribution chain. D. product markets are markets for factors of production—​labor, ​capital, natural​ resources, and entrepreneurial​ ability, while factor markets are markets for goods and services.

postive

Rising paper prices will increase textbook prices. This represents ___ analysis .

D

Scarcity is central to the study of economics because it implies that ___. A. society must make decisions at the margin B. wants are unlimited C. economic agents are rational D. every choice involves opportunity cost

C

State whether each of the following events will result in a movement along the demand curve for​ McDonald's Big Mac hamburgers or whether it will cause the curve to shift. McDonald's distributes ​$1.00 off coupons. This will cause A. demand for​ McDonald's Big Mac hamburgers to shift to the right. B. demand for​ McDonald's Big Mac hamburgers to shift to the left. C. a movement along the demand curve for​ McDonald's Big Mac hamburgers.

normative

The price of coffee at Starbucks is too high. This represents ___ analysis

A

State whether each of the following events will result in a movement along the demand curve for​ McDonald's Big Mac hamburgers or whether it will cause the curve to shift. The U.S. economy enters a period of decline in incomes. This will cause A. demand for​ McDonald's Big Mac hamburgers to shift to the right if they are inferior goods. Your answer is correct. B. demand for​ McDonald's Big Mac hamburgers to shift to the left if they are inferior goods. C. a movement along the demand curve for​ McDonald's Big Mac hamburgers if they are normal goods.

B

State whether each of the following events will result in a movement along the demand curve for​ McDonald's Big Mac hamburgers or whether it will cause the curve to shift. The price of Burger​ King's Whopper hamburger increases. This will cause A. demand for​ McDonald's Big Mac hamburgers to decrease. B. demand for​ McDonald's Big Mac hamburgers to increase. Your answer is correct. C. a movement along the demand curve for​ McDonald's Big Mac hamburgers.

A

State whether each of the following events will result in a movement along the demand curve for​ McDonald's Big Mac hamburgers or whether it will cause the curve to shift. The price of fries decreases due to a potato surplus. This will A. increase the demand for McDonald's Big Mac hamburgers. B. decrease the demand for McDonald's Big Mac hamburgers. C. cause a movement along the demand curve for​ McDonald's Big Mac hamburgers.

B

Suppose the equilibrium price and equilibrium quantity of gold both decrease. Which of the following would produce such a​ change? A. The market demand curve for gold could have increased. B. The market demand curve for gold could have decreased. C. The market supply curve for gold could have decreased or the market demand curve for gold could have increased. D. The market supply curve for gold could have increased. E. The market supply curve for gold could have decreased or the market demand curve for gold could have decreased.

E

Suppose the price of a complement to LCD televisions rises. What effect will this have on the market equilibrium for LCD​ TVs? The equilibrium price of LCD TVs will A. not change and the equilibrium quantity will not change. B. decrease and the equilibrium quantity will increase. C. increase and the equilibrium quantity will decrease. D. increase and the equilibrium quantity will increase. E. decrease and the equilibrium quantity will decrease.

D

Suppose we can divide all the goods produced by an economy into two​ types: consumption goods and capital goods. Capital​ goods, such as​ machinery, equipment, and​ computers, are goods used to produce other goods. Is it likely that the production possibilities frontier in this situation would be a straight line or bowed out? A. The production possibilities frontier would likely be bowed out because resources are likely equally well suited to produce both consumption and capital goods. B. The production possibilities frontier would likely be a straight line because not all resources are equally well suited to produce both consumption and capital goods. C. The production possibilities frontier would likely be a straight line because resources are likely equally well suited to produce both consumption and capital goods. D. The production possibilities frontier would likely be bowed out because not all resources are equally well suited to produce both consumption and capital goods. Your answer is correct.

C

The difference between a change in supply and a change in the quantity supplied is that the latter is A. determined by the willingness of producers to sell while the former is set by the ability of firms to produce. B. conditional upon a change in the​ former, but not vice versa. C. displayed graphically as a movement along a supply curve while the former is shown as a shift in the supply curve. D. caused by a variety of variables other than the product's price while the former is produced by a change in the product's own price.

normative

The federal government should spend more on AIDS research. This represents ____ analysis. .

D

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. A. more instant B. greater C. more proportional D. smaller

C

The production possibilities frontier will shift outward A. if resources are used to produce consumption goods. B. if production occurs outside the production possibilities frontier. C. if technological advances occur. D. if resources are not used in production. E. if resources are not used to produce capital goods.

B

The three economic questions that every society must answer are ___. A. What kind of government will the society​ have, how will it be​ run, and who will run​ it? B. What goods will be​ produced, how will they be​ produced, and who will receive the​ goods? Your answer is correct. C. What are the prices of​ goods, how are they​ determined, and who will pay for​ them? D. What economic system will be​ used, how will it be​ implemented, and who will make market​ decisions?

D

We can show economic​ efficiency: A. with points inside the production possibilities frontier. B. with points outside the production possibilities frontier. C. with points on and outside the production possibilities frontier. D. with points on the production possibilities frontier. E. with points inside and on the production possibilities frontier.

A

We can show economic​ inefficiency: A. with points inside the production possibilities frontier. B. with points on and outside the production possibilities frontier. C. with points on the production possibilities frontier. D. with points inside and on the production possibilities frontier. E. with points outside the production possibilities frontier.

A

What are private property​ rights? Private property rights​ are: A. the rights individuals and firms have to the exclusive use of​ tangible, physical property and intellectual property. B. the rights individuals but not firms have to the exclusive use of​ tangible, physical property and intellectual property. C. the rights individuals and firms have to the exclusive use of​ tangible, physical property but not intellectual property. D. the rights individuals have to the exclusive use of intellectual property and firms have to the exclusive use of​ tangible, physical property. E. the rights individuals and firms have to the exclusive use of intellectual property but not​ tangible, physical property.

B

What are the implications of this idea for the shape of the production possibilities​ frontier? A. The production possibilities frontier will be bowed inward. B. The production possibilities frontier will be bowed outward. C. The production possibilities frontier will have a negative slope. D. The production possibilities frontier will have a positive slope. E. The production possibilities frontier will be a straight line.

B

What do economists mean when they use the Latin expression ceteris paribus​? Part 2 A. The thing speaks for itself. B. All else equal. C. The whole is just the sum of the parts. D. Prior to an event

C

What does increasing marginal opportunity costs​ mean? A. Production is not occurring on the production possibilities frontier. B. The economy is unable to produce increasing quantities of goods and services. C. Increasing the production of a good requires larger and larger decreases in the production of another good. D. Increasing the production of a good requires decreases in the production of another good. E. Increasing the production of a good requires smaller and smaller decreases in the production of another good.

E

What is a free​ market? A. A free market is one where the government restricts how a good or service can be produced. B. A free market is one where the government restricts how a factor of production can be employed. C. A free market is one without property rights. D. A free market is one with perfect equality. E. A free market is one where the government does not control the production of goods and services.

D

What is absolute​ advantage? A. The gain from consuming a product whose benefit is greater than its cost. B. The ability to use all available resources to produce output. C. The ability to produce a good or service at a lower opportunity cost than other producers. D. The ability to produce more of a good or service than competitors using the same amount of resources. E. The gain from selling a product for more than it costs to produce that product.

B

What is an​ entrepreneur? A. Entrepreneurs manage households that consume goods and services. B. Entrepreneurs operate businesses that produce goods and services. C. Entrepreneurs regulate profits. D. Entrepreneurs manage the free market. E. Entrepreneurs are policymakers in the government.

E

What is comparative​ advantage? A. The gain from consuming a product whose benefit is greater than its cost. B. The ability to use all available resources to produce output. C. The gain from selling a product for more than it costs to produce that product. D. The ability to produce more of a good or service than competitors using the same amount of resources. E. The ability to produce a good or service at a lower opportunity cost than other producers.

B

What is the basis for​ trade? A. Efficiency. B. Comparative advantage. C. Economic growth. D. Available resources. E. Absolute advantage.

C

What is the outcome of enforcing contracts and property rights in a market​ system? A. no effect on economic activity B. an unpredictable but definite effect on economic activity C. increased economic activity D. decreased economic activity

D

What problems might African farmers have because they lack secure property​ rights? A. Without secure property​ rights, farmers in Africa may be reluctant to make the investments in their farms that would raise the​ farms' productivity. B. Without secure property​ rights, farmers are not able to obtain funds by selling some of their land. C. Without secure property​ rights, it is harder for farmers to borrow because they cannot use their land as collateral. D. All of the above.

E

What role do they play in the working of a market​ system? Private property​ rights: A. encourage a significant number of people to be willing to risk funds by investing them in business. B. encourage firms to spend money on research and development. C. are the basis for international trade. D. determine what goods and services will be produced. E. both a and b.

C

Whether carried out by an individual or a​ country, production beyond the production possibilities frontier A. is possible only through trade. B. happens as a result of forced saving. C. is not physically possible. D. can occur by acquiring more productive resources.

B

Which of the following best describes scarcity? A. markets cannot properly allocate resources B. unlimited wants exceed the limited resources available C. prices of goods are very high D. wants cannot be fulfilled and thus all goods must be rationed

B

Which of the following is a correct statement about a mixed​ economy? A. In a mixed​ economy, most economic decisions are made by the government but markets plays a significant role in the allocation of resources. B. In a mixed​ economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources. Your answer is correct. C. In a mixed​ economy, the government makes all economic decisions. D. In a mixed​ economy, all economic decisions are made in markets.

A

Which of the following is the correct definition of demand​ curve? A. a curve that shows the relationship between the price of a product and the quantity of the product demanded B. the demand for a product by all the consumers in a given geographic area C. a table that shows the relationship between the price of a product and the quantity of the product demanded D. the quantity of a good or a service that a consumer is willing to purchase at a particular price

B

Which of the following is the correct definition of demand​ schedule? A. the demand for a product by all the consumers in a given geographic area B. a table that shows the relationship between the price of a product and the quantity of the product demanded C. the quantity of a good or a service that a consumer is willing to purchase at a particular price D. a curve that shows the relationship between the price of a product and the quantity of the product supplied

B

Which of the following is the​ textbook's definition of a supply​ curve? A. a table that shows the relationship between the price of a product and the quantity of the product supplied B. a curve that shows the relationship between the price of a product and the quantity of the product supplied C. the quantity of a good or service that a firm is willing to supply at a particular price D. None of the above.

B

Which of the following is the​ textbook's definition of a supply​ schedule? A. a curve that shows the relationship between the price of a product and the quantity of the product demanded B. a table that shows the relationship between the price of a product and the quantity of the product supplied C. the quantity of a good or service that a firm is willing to supply at a particular price D. None of the above.

C

Which of the following statements regarding secure property rights is​ true? A. Property rights—which include only physical property​ (not intellectual rights to new products or the processes used to produce goods and ​services)—refer to the rights of firms and individuals to have exclusive use of their property. B. It is solely the responsibility of the individuals who own the property to ensure that their rights are protected. C. Property rights provide incentives for people to maintain and increase the value of the property they own. D. All of the above.

E

Why are independent courts important for a​ well-functioning economy? Independence is necessary for​ courts: A. to make their decisions based on the law. B. to make their decisions free of intimidation by criminal gangs. C. to make their decisions free of influence from people with powerful political connections. D. to make their decisions free of influence from other parts of the government. E. all of the above.

C

Why are models based on​ assumptions? A. Because models are only concerned about questions of​ equity, not question of efficiency. B. Because models are very different from theories. C. Because models have to be simplified to be useful. Your answer is correct. D. Because models are not intended to analyze​ real-world events

A

Why do entrepreneurs play a key role in a market​ system? A. They bring together factors of production. B. They determine who will receive goods and services. C. They supply labor as a factor of production. D. They influence income distribution through taxes and transfer payments. E. They determine what goods and services are produced.

A

With respect to​ consumption, individuals and countries A. can, through​ trade, consume beyond their production possibilities frontiers. B. can consume beyond their production possibilities frontiers only during periods of economic prosperity. C. can, by choosing not to save for the​ future, consume beyond their production possibilities frontiers. D. are contrained to consume on or inside their production possibilities frontiers.

complementary

You observe that when the price of Jiffy peanut butter increases the demand for Smucker's Strawberry jam decreases. Jiffy peanut butter and Smucker's Strawberry jam are considered to be ____________ goods.

positive, normative, positive

____ analysis is concerned with what is​, and ____ analysis is concerned with what ought to be. Economics is about ____ analysis, which measures the costs and benefits of different courses of action.

A

b. Which of the following statements is​ true? A. By protecting private property​ rights, governments make it more likely that investments will be made in businesses that provide jobs and income for workers. B. Only rich countries have recognized governments that would even be capable of securing property rights. C. Protecting property rights has no impact on a​ country's standard of living. D. It is easy for a country to become rich even without having secure property rights.