ECH Chapter 6 Quiz, ECH Chapter 5 Quiz, ECH Chapter 4 quiz, ECH Chapter 2 Quiz, ECH Chapter 3 quiz, Chapter 1 ECH Quiz

Reference: Ref 4-14 (Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to see The Nutty Nutcracker is $50, then Francisco's producer surplus is:

$0.

Reference: Ref 4-14 (Table: Producer Surplus) Look at the table Producer Surplus. If the tickets to The Nutty Nutcracker are free and there is no other market for tickets, the total producer surplus for the five students is:

$0.

Reference: Ref 4-9 (Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the weekly market for hamburgers in Irvine, Kentucky. If the price of a hamburger is $1 and 200 hamburgers are supplied, producer surplus will equal:

$50.

Reference: Ref 4-28 (Figure: The Gains from Trade) Look at the figure The Gains from Trade. What is the total surplus in this market when the demand curve is D1 and the market is in equilibrium?

$62.50

If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:

0.75.

A restaurant manager has estimated that the price elasticity of demand for meals is 2. If the restaurant increases menu prices by 5%, she can expect the number of meals sold to decrease by _____ and total revenue to _____.

10%; fall

Reference: Ref 2-9 (Figure: Wine and Wheat) Look at the figure Wine and Wheat. The opportunity cost of moving from producing ONLY wheat to producing ONLY wine is _____ tons of wheat.

15

Reference: Ref 2-1 (Table: Production Possibilities Schedule I) Look at the table Production Possibilities Schedule I. If the economy produces two units of consumer goods per period, it also can produce at most _____ units of capital goods per period.

24

Which of the following best describes demand?

A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.

Reference: Ref 3-15 (Figure: Demand for Coconuts) Look at the figure Demand for Coconuts. If there is an increase in preference for coconuts, it will be represented in the figure as a movement from:

A to C.

Reference: Ref 3-1 (Figure: Supply of Coconuts) Look at the figure Supply of Coconuts. If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts increased, it would be represented in the figure as a movement from:

C to A.

Reference: Ref 4-23 (Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. At a price of P2, consumer surplus equals the area:

ABP2.

Reference: Ref 3-15 (Figure: Demand for Coconuts) Look at the figure Demand for Coconuts. If coconuts are a normal good and the price of coconuts increases, it will be represented in the figure as a movement from:

B to A.

Reference: Ref 3-1 (Figure: Supply of Coconuts) Look at the figure Supply of Coconuts. An expectation on the part of coconut suppliers that the price of coconuts will be significantly higher in the very near future would be represented in the figure as a movement from:

B to E.

If a good has a price-inelastic demand, then which of the following is NOT likely to be characteristic of this good?

It has many substitutes.

Which of the following is an example of individual choice?

Lauren spends her allowance on pillows for her bed.

If they spend all night writing computer programs, Laurence can write 10 programs, and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 pairs, and Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that _____ has an absolute advantage in _____.

Laurence; both programs and sunglasses.

I know when I shop at the local grocery store, I am helping my community. This statement best represents this economic concept:

One person's spending is another person's income.

Reference: Ref 3-20 (Figure: The Market for Candy) Look at the figure The Market for Candy. A surplus of the good will exist at a price of:

P1.

You notice that when a new yoga class is offered at the student recreation center at a highly desirable time, some students from the other yoga classes go to the new class instead. This statement best represents this economic concept:

People usually exploit opportunities to make themselves better off.

There are several close substitutes for Quaker State oil but fewer substitutes for a complete checkup of your car's engine. We can expect the demand for:

Quaker State oil to be more price-elastic.

Reference: Ref 5-1 (Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent0, renters would be willing to pay a price at least as high as:

Rent4 for Q0 units.

Which of these is one of the four principles of individual choice?

Resources are scarce.

If the government intervened in the market by lowering the price of a good below the equilibrium price, which of the following would NOT occur?

The outcome would be efficient.

Which of the following is a positive statement?

The rate of unemployment is 4%.

You decide to join the economics club, but this means you can't join the accounting club because it meets at the same time. This statement best represents this economic concept:

The real cost of something is what you must give up to get it.

A binding minimum wage will generally cause increased unemployment for low-skilled workers.

True

Equity is the same as efficiency.

True

Which of the following is a question of marginal analysis

What additional output does a family business produce when it hires one more worker?

Market failure occurs when:

individual actions have side effects that are not properly taken into account.

Reference: Ref 2-6 (Figure: Production Possibility Frontier for Tealand) Look at the figure Production Possibility Frontier for Tealand. If Tealand is producing 10 million scones and 10 million cups of tea (point A), we know that the economy:

is using its resources inefficiently.

If the government imposes binding rent control:

it may result in some landlords leaving the business because they cannot cover costs.

A binding price ceiling is designed to:

keep prices below the equilibrium level.

Since the price of walnuts increases as the demand for cashews increases, we can assume that these two goods are:

substitutes.

Equilibrium quantity will always increase if:

supply and demand both increase.

Maximum total surplus in the market for chocolate occurs when:

the market is in equilibrium.

If a frost destroys much of the grapefruit crop, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus:

will decrease.

Vonda and Aleiyah are shopping together at the mall for new jeans. Vonda is willing to pay $90 and Aleiyah is willing to pay $50 for a pair of jeans. If the price of jeans is $59, how much total consumer surplus is achieved in this market?

$31

Reference: Ref 4-3 (Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each student wants to buy one ticket. If the tickets to The Nutty Nutcracker are free and there is no other market for tickets, the total consumer surplus for the five students is:

$320.

Reference: Ref 5-1 (Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are imposed and the government wants them to be immediately effective, they will most likely be set at either _____ or _____.

Rent0; Rent1

Reference: Ref 5-1 (Figure: Rent Controls) Look at the figure Rent Controls. Suppose that rent controls are imposed. If the government wanted a rent control ceiling to be effective immediately, what is one possible price to set?

Rent1

Reference: Ref 5-1 (Figure: Rent Controls) Look at the figure Rent Controls. Without rent controls, the equilibrium rent is:

Rent2.

Which of the following principles underlies the gains from trade?

Resources should be used as efficiently as possible to achieve society's goals.

For which of the following decisions would marginal analysis be MOST relevant?

Should Hong work an additional hour or take a short nap?

For which of the following decisions would marginal analysis be most relevant?

Should I eat another doughnut?

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

True

A decrease in demand with no change in supply will lead to _____ in equilibrium quantity and _____ in equilibrium price.

a decrease; a decrease

Which of the following is likely to cause a rightward shift in the demand for home-delivered pizza?

a larger population

A price ceiling is:

a maximum price sellers are allowed to charge for a good or service

A price ceiling is:

a maximum price sellers are allowed to charge for a good or service.

A decrease in the price of eggs will result in:

a movement along the demand curve for eggs.

A student organization is formed on your college campus to protest against the high rent for apartments near campus. This organization is planning a meeting with the dean and president of the college. Which of the following best describes the policy the student organization will fight for?

a price ceiling

A quota is:

a quantity restriction.

For consumers, pizza and hamburgers are substitutes. A rise in the price of a pizza causes _____ in the equilibrium price of a hamburger and _____ in the equilibrium quantity of hamburgers.

a rise; an increase

An increase in the price and an ambiguous change in quantity is most likely caused by:

a shift to the left in supply and a shift to the right in demand.

If suppliers expect prices for their product to rise next year, then one would expect:

a shift to the left in the supply curve for the product this year.

Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price of its motorcycles, we can expect:

a shift to the right in the demand curve for Hondas and higher prices for Hondas.

Reference: Ref 5-9 (Figure: Supply and Demand) Look at the figure Supply and Demand. A price ceiling of P3 causes:

a shortage equal to the distance DE.

Reference: Ref 5-2 (Table: The Market for Soda) Look at the table The Market for Soda. If the government imposes a price ceiling of $0.50 per can of soda, there will be:

a shortage of three cans.

Suppose oranges and clementines are considered to be substitutes. Holding everything else constant, if the price of oranges increases, then the demand for _____ will _____.

clementines; increase

The pair of items that is likely to have the highest cross-price elasticity of demand is:

coffee and tea.

Thinking in economic terms, when Mary Sweet-Tooth is deciding whether to eat another brownie, she:

compares all of the benefits and costs of eating another brownie.

Reference: Ref 4-28 (Figure: The Gains from Trade) Look at the figure The Gains from Trade. When demand increases from D1 to D2, equilibrium total surplus:

increases by $27.50.

Reference: Ref 4-10 (Figure: Producer Surplus) Look at the figure Producer Surplus. When the price rises from $25 to $35, producer surplus _____ for a total producer surplus of _____.

increases by $30; $60

The law of demand states that other things equal, as the price:

increases, the quantity demanded will decrease.

Which of the following methods of discouraging speeding is likely to be MOST effective because people usually exploit opportunities to make themselves better off?

increasing the fine associated with speeding tickets

Reference: Ref 2-11 (Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier. Points A, B, E, and F:

indicate combinations of cars and computers that society can produce using all of its resources efficiently.

Scarcity exists when:

individuals can have more of one good but only by giving up something else.

Which is NOT an inefficiency caused by binding price ceilings?

inefficient allocation of sales among sellers

All points inside the production possibility frontier represent:

inefficient production points.

A binding rent-control price ceiling results in all of the following EXCEPT:

inefficiently high quality of the good being sold.

Reference: Ref 6-13 (Figure: The Demand Curve) Look at the figure The Demand Curve. Between prices $4 and $5, demand is _____, and total revenue will _____ if price increases.

inelastic; increase

Demand for vegetables at a small farmers' market is steady, but the supply of vegetables has decreased because of a drought. This is good news for farmers if demand is _____ and the _____ effect outweighs the _____ effect.

inelastic; price; quantity

If government decided to increase taxes or decrease its spending, most likely this was to correct:

inflation.

Consider a production possibility frontier for Iraq. If in 2014 Iraq's resources are not being fully utilized, Iraq will be somewhere _____ of its production possibility frontier.

inside

In movement along a production possibility frontier, the opportunity cost to society of getting more of one good:

is measured by the amount of the other good that must be given up.

Reference: Ref 2-5 (Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. Point Z:

is unattainable, all other things unchanged.

Which is NOT an example of a resource?

land

Price ceilings will impose costs on society because they:

lead to a smaller quantity offered on the market.

Quotas often:

lead to deadweight losses resulting from a wedge between the price of sellers and that of demanders.

If minimum wages are set above the equilibrium wage in the market, then the number of workers hired will be _____ the number of people who are willing to work.

less than

One day, Martha wakes up and in frustration yells, "Decisions, decisions, decisions! Why do I have to make decisions about everything?" Martha's frustrations stem from the fact that:

like all economic beings, she faces constraints and cannot have everything she wants.

Which of the following describes two goods that are most likely substitutes in consumption?

loaves of bread and hamburger buns

To be binding, a price ceiling must be set at a price:

lower than the equilibrium price.

An increase in efficiency means that an economy has:

made more people better off without making others worse off.

Economists define an efficient use of resources as a situation in which:

one person can be made better off but only by making another person worse off.

Your elderly grandma tells you: "I haven't been taking my beloved walks because I'm concerned about falling and getting hurt. See, there is always a cost to doing something. But if you don't do anything, then there is no cost." Your grandma does not understand the economic concept of:

opportunity cost.

Zoe's grandparents are excited about finally paying off their mortgage, because, as they say, "Our cost of housing is now zero." Zoe should explain to them the economic principle of:

opportunity cost: by living in the house, they are giving up the opportunity to sell the house, buy a smaller one, and pocket the difference.

Reference: Ref 3-10 (Figure: Shifts in Demand and Supply) Look at the figure Shifts in Demand and Supply. The graph shows how supply and demand might shift in response to specific events. Suppose a new machine allows restaurants and fast-food outlets to produce french fries at a lower cost. Which panel BEST describes how this will affect the market for french fries?

panel A

Reference: Ref 3-13 (Figure: Shifts in Demand and Supply IV) Look at the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel BEST describes how this will affect the market for big-screen televisions, a normal good?

panel B

Reference: Ref 3-13 (Figure: Shifts in Demand and Supply IV) Look at the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose half of the people in San Diego move to Colorado Springs. Which panel BEST describes how this will affect the market for houses in Colorado Springs?

panel B

Reference: Ref 3-10 (Figure: Shifts in Demand and Supply) Look at the figure Shifts in Demand and Supply. The figure 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?

panel C

Reference: Ref 3-11 (Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and Supply II. The graph shows how supply and demand might shift in response to specific events. Suppose a drought destroys one-third of the nation's peanut crop. Which panel BEST describes how this will affect the market for peanuts?

panel C

When a market is in equilibrium:

people have exploited all opportunities to make themselves better off.

A rent control scheme setting a maximum amount of rent paid below the equilibrium rental price would most likely be supported by:

people who wish to rent such an apartment.

A maximum price set below the equilibrium price is a:

price ceiling.

One consequence of equilibrium is that when trying to figure out which checkout line at the college bookstore is the fastest, one should choose:

randomly; if one line were truly faster, everyone would move to it and it would no longer be faster.

Which of the following is studied in macroeconomics?

recessions

To encourage people to retire later, because people usually exploit opportunities to make themselves better off, the government could:

reduce Social Security benefits.

The total surplus in a market is:

the market is in equilibrium.

The primary emphasis in macroeconomics is on:

the national economy.

The cost of leaving the skating championship before it ends is _____, while the cost of staying for the entire match is _____.

the opportunity cost of not seeing the perfect 10 performance; the opportunity cost of whatever else you could have done during that time

When a chef prepares a dinner for a customer, which of the following is physical capital?

the oven

Reference: Ref 5-9 (Figure: Supply and Demand) Look at the figure Supply and Demand. A binding price ceiling is represented by:

the price P3.

Producer surplus is represented by the area _____ the supply curve and _____ the price.

the price of the good minus the cost of producing the good

Producer surplus for an individual seller is equal to:

the price of the good minus the cost of producing the good.

A shift of the demand curve for thin-crust pizza would NOT be caused by a change in:

the price of thin-crust pizza.

Although freshwater is very abundant in most places, it is scarce because:

there is not enough of it to meet all needs.

If equilibrium exists:

there will be no remaining opportunities for individuals to make themselves better off.

Jeanette is willing to pay $100 for the first pair of shoes, $80 for the second pair, $50 for the third, and $30 for the fourth. If shoes cost $50, Jeanette will buy _____ pairs of shoes and her total consumer surplus equals _____.

three; $80

Mountain River Adventures offers whitewater rafting trips down the Colorado River. It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trip is $150, Mountain River Adventures will offer _____ trips per day and will have producer surplus equal to _____.

three; $90

The basic concern of microeconomics is:

to study the choices people make.

The provision of disabled-parking passes to those with disabilities often requires that more than enough spaces be available for those with disabilities. As a result, many of these spaces are vacant quite often when they could be used by able-bodied individuals. Such a situation illustrates the:

trade-off between efficiency and equity.

The primary emphasis in macroeconomics is on:

he national economy.

Reference: Ref 5-27 (Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government imposes a quota limiting sales of shrimp to 1,000 pounds, the quota rent per pound is:

$0.

Reference: Ref 5-2 (Table: The Market for Soda) Look at the table The Market for Soda. If the government does not impose a price control, the price of a can of soda will equal:

$0.75.

Mark and Rasheed are at the bookstore buying new calculators for the semester. Mark is willing to pay $75 and Rasheed is willing to pay $100 for a graphing calculator. The price for a calculator at the bookstore is $65. How much is Mark's individual consumer surplus?

$10

Reference: Ref 4-2 (Table: Consumer Surplus and Phantom Tickets) The table Consumer Surplus and Phantom Tickets shows each student's willingness to pay for a Phantom of the Opera ticket. Assume that each student wants to buy one ticket. If the price of a ticket to see Phantom of the Opera is $50, then Robert's consumer surplus is:

$10.

Reference: Ref 4-14 (Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to see The Nutty Nutcracker is $75 and there is no other market for tickets, the total producer surplus for the five students is:

$139.

Reference: Ref 5-33 (Figure: Market I) Look at the figure Market I. A surplus of the good will result if the price is:

$15.

Reference: Ref 3-4 (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. Given the initial equilibrium of S1 and D, any price lower than _____ will exert pressure for the price to _____.

$2.50; rise

Reference: Ref 5-32 (Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied and Quantity Demanded. A price floor equal to _____ would produce excess supply in this market.

$20

Reference: Ref 4-2 (Table: Consumer Surplus and Phantom Tickets) The table Consumer Surplus and Phantom Tickets shows each student's willingness to pay for a Phantom of the Opera ticket. Assume that each student wants to buy one ticket. If the box office price of a ticket to see Phantom of the Opera is $130 and there is no other market for tickets, the total consumer surplus for the five students is:

$20.

Reference: Ref 5-33 (Figure: Market I) Look at the figure Market I. A price floor at $15 would result in deadweight loss of:

$20.

Reference: Ref 4-9 (Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the weekly market for hamburgers in Irvine, Kentucky. If 400 hamburgers are sold, producer surplus will equal:

$200.

Luis is willing to sell his pool table for no less than $600, but if he gets $840, the producer surplus Luis receives is:

$240.

Reference: Ref 4-2 (Table: Consumer Surplus and Phantom Tickets) The table shows Consumer Surplus and Phantom Tickets each student's willingness to pay for a Phantom of the Opera ticket. Assume that each student wants to buy one ticket. If the box office price of a ticket to see Phantom of the Opera is $50 and there is no other market for tickets, the total consumer surplus for the five students is:

$240.

Reference: Ref 4-3 (Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcracker is $75, Lois's consumer surplus is:

$25.

Mark and Rasheed are at the bookstore buying new calculators for the semester. Mark is willing to pay $75 and Rasheed is willing to pay $100 for a graphing calculator. The price for a calculator at the bookstore is $65. How much is their total consumer surplus?

$45

Reference: Ref 5-27 (Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government imposes a quota limiting sales of shrimp to 500 pounds, the quota rent per pound is:

$5.

Reference: Ref 4-9 (Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the weekly market for hamburgers in Irvine, Kentucky. If the price of burgers falls from $1.50 to $1.00, there is a loss in producer surplus. How much of the loss accrues because of the change in the quantity supplied?

$50

Reference: Ref 4-14 (Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to see The Nutty Nutcracker is $75, then Dudley's producer surplus is:

$50.

Reference: Ref 4-2 (Table: Consumer Surplus and Phantom Tickets) The table shows Consumer Surplus and Phantom Tickets each student's willingness to pay for a Phantom of the Opera ticket. Assume that each student wants to buy one ticket. If the box office price of a ticket to see Phantom of the Opera is $50 and there is no other market for tickets, the total consumer surplus for the five students is:

$50.

Reference: Ref 4-3 (Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcracker is $50, Lois's consumer surplus is:

$50.

Reference: Ref 4-9 (Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the weekly market for hamburgers in Irvine, Kentucky. If the price of burgers falls from $1.50 to $1.00, there is a loss in producer surplus. How much of the loss accrues because of the change in the quantity supplied?

$50.

Reference: Ref 4-14 (Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to see The Nutty Nutcracker is $50 and there is no other market for tickets, then total producer surplus for the five students is:

$74.

Reference: Ref 4-14 (Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to see The Nutty Nutcracker is $75 and there is no other market for tickets, the total producer surplus for the five students is:

$74.

Reference: Ref 4-14 (Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to see The Nutty Nutcracker is $75, then Caitlin's producer surplus is:

$74.

The Atlanta Symphony wants to make sure that its concerts are affordable for all residents of Atlanta and therefore prices all of its tickets at $25. However, outside Symphony Hall, people can sell the same tickets for $75 or more. The true cost to the concertgoer of a ticket to the symphony is at least:

$75.

Reference: Ref 3-6 (Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. If there is a decrease in supply of 2,000 bushels at each price, the equilibrium price and quantity will be _____ and _____ bushels, respectively.

$7; 5,000

Reference: Ref 4-27 (Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for pumpkins. Their willingness to pay for each pepper is shown in the table Pumpkin Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also shown. The equilibrium price for pumpkins is:

$8 Quantity of Pumpkins Andy's willingness to pay Ben's willingness to pay Cindy's cost Diane's cost 1st pumpkin $12 $11 $ 3 $4 2nd pumpkin 10 9 5 6 3rd pumpkin 8 7 8 9 4th pumpkin 6 5 10 11

(Figure: Producer Surplus) Look at the figure Producer Surplus. Total producer surplus is _____ when the price is $40.

$80

Reference: Ref 4-10 (Figure: Producer Surplus) Look at the figure Producer Surplus. Total producer surplus is _____ when the price is $40.

$80

Reference: Ref 4-10 (Figure: Producer Surplus) Look at the figure Producer Surplus. When the price falls from $45 to $35, producer surplus _____ for a total producer surplus of _____.

$80

Reference: Ref 4-28 (Figure: The Gains from Trade) Look at the figure The Gains from Trade. What is the total surplus in this market when the demand curve is D2 and the market is in equilibrium?

$90.00

Reference: Ref 2-22 (Figure: Comparative Advantage) Look at the figure Comparative Advantage. The opportunity cost of producing 1 box of peaches for Westland is _____ box(es) of oranges.

0.25

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to _____, and demand is described as _____.

0.2; inelastic

Reference: Ref 2-22 (Figure: Comparative Advantage) Look at the figure Comparative Advantage. The opportunity cost of producing 1 box of oranges for Eastland is _____ box(es) of peaches.

1

Reference: Ref 2-8 (Table: Trade-off of Study Time and Leisure Time) Look at the table Trade-off of Study Time and Leisure Time. A student sleeps 8 hours per day and divides the remaining time between study time and leisure time. The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day. If a student decides to consume one additional hour of leisure time, how many hours of study time must she give up?

1

Tomas produces 100 cartons of free range eggs when the price is $5 and 150 cartons of free range eggs when the price is $7. What is the value of Tomas's price elasticity of supply?

1.2

Reference: Ref 6-2 (Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.50 and $1.25?

1.22

Reference: Ref 6-13 (Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $6 and $7 is approximately:

1.86

Reference: Ref 6-13 (Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $6 and $7 is approximately:

1.86.

Reference: Ref 6-2 (Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $2.00 and $1.75?

3.00

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. With specialization, _____ brownies and _____ cookies will be made in one day.

40; 15

Reference: Ref 2-27 (Scenario: Linear Production Possibility Frontier) Look at the scenario Linear Production Possibility Frontier. Largetown CANNOT produce _____ shirts and _____ pairs of socks.

40; 40

Reference: Ref 2-6 (Figure: Production Possibility Frontier for Tealand) Look at the figure Production Possibility Frontier for Tealand. Tealand is producing at point C on its production possibility frontier. What is the opportunity cost of increasing the production of tea from 20 million cups to 30 million cups?

5 million scones

Reference: Ref 5-2 (Table: The Market for Soda) Look at the table The Market for Soda. If the government imposes a price ceiling of $1 per can of soda, the quantity of soda demanded will be:

8 cans.

Which of the following statements is CORRECT?

A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift of the demand curve.

In the market for corn tortilla chips, what would cause a price increase?

A fungus kills much of the corn crop in Nebraska.

Which of the following statements is CORRECT?

An economic situation is in equilibrium when no individual would be better off taking a different action.

Which of the following best exemplifies the law of demand?

As the price of a car rental rises, fewer cars are rented.

Other things being equal, the price elasticity of demand for a product will be lower:

Bayer aspirin to be more price-elastic.

Reference: Ref 6-4 (Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?

C

(Figure: Change in Total Surplus) Look at the figure Change in Total Surplus. Which of the following areas represent the change in total surplus when the price falls from P2 to P3?

C and E

Reference: Ref 4-22 (Figure: Change in Total Surplus) Look at the figure Change in Total Surplus. Which of the following areas represent the change in total surplus when the price falls from P1 to P2?

C and E

Reference: Ref 4-22 (Figure: Change in Total Surplus) Look at the figure Change in Total Surplus. Which of the following areas represent the change in total surplus when the price falls from P2 to P3?

C and E

(Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly elastic demand curve?

D

Reference: Ref 6-4 (Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly elastic demand curve?

D

Reference: Ref 3-15 (Figure: Demand for Coconuts) Look at the figure Demand for Coconuts. If coconuts are a normal good and consumers believe that the price of coconuts will rise significantly in the near future, it will be represented in the figure as a movement from:

E to B.

If the demand curve for clams is downward-sloping, a quota that is set below the equilibrium quantity will result in a demand price that is lower than the equilibrium price.

False

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. Based on this information, _____ has the comparative advantage in making brownies and _____ has the comparative advantage in making cookies.

Mark; Julie

Two neighbors, Molly and Sandy, are separated by a white picket fence. Each neighbor has a garden that grows tomatoes and peppers. To gain from trade, _____ can trade _____ to _____ for _____ if _____ is the more efficient grower of peppers.

Molly; peppers; Sandy; tomatoes; Molly

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What will happen?

More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price.

Which of the following statements is NOT true?

Most opportunity costs are zero.

Reference: Ref 5-16 (Figure: The Market for Milk) Look at the figure The Market for Milk. With a binding price floor, the price could be equal to _____, consumers would demand _____, and producers would supply _____.

P1; Q1; Q3

(Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. If the price rises from P1 to P2, consumer surplus decreases by the area:

P1P2BF.

Reference: Ref 4-23 (Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. If the price falls from P2 to P1, consumer surplus increases by the area:

P1P2BF.

Reference: Ref 4-23 (Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. If the price rises from P1 to P2, consumer surplus decreases by the area:

P1P2BF.

Reference: Ref 5-17 (Figure: The Market for Tortillas) Look at the figure The Market for Tortillas. With a nonbinding price floor, the price could be equal to _____, consumers would demand _____, and producers would supply _____.

P2; Q2; Q2

Reference: Ref 3-20 (Figure: The Market for Candy) Look at the figure The Market for Candy. Equilibrium occurs at a price of _____, and the equilibrium quantity is equal to _____.

P2; Q3

Which of the following is NOT a reason that markets usually lead to efficiency?

People are naturally efficient.

Reference: Ref 3-4 (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. What might cause the supply curve to shift from S2 back to the initial supply curve S1?

The Organization of Petroleum Exporting Countries (OPEC) restricts the production of crude oil.

Which of the following is a normative statement?

The best way to encourage growth in the economy is through government spending.

Nate and Dylan are brothers. They have to mow the lawn and clean their rooms before they can go to the high school football game. Nate mows the lawn and Dylan picks up the rooms, and they make it to the football game on time. This statement best represents this economic concept:

There are gains from trade.

According to the textbook, markets usually lead to efficiency.

True

After graduation many students' demand for used cars decreases. This may be because used cars are considered a normal good to college graduates.

True

An economic model is a simplified version of reality that is used to analyze real-world economic situations.

True

An economic situation is in equilibrium when no individual would be better off taking a different action.

True

An economy is efficient if one person can be made better off by reallocating resources without making anyone else worse off.

True

As long as individuals know that they can find the goods and services they want in the market, they are willing to forgo being self-sufficient and are willing to specialize.

True

Because of the opportunity cost, if the United States spends $87 billion in the rebuilding of Iraq, it has to forgo the opportunity to spend $87 billion on some other program.

True

Because one person's spending is another person's income, if one group in the economy spends more, the incomes of other groups will increase.

True

Economists make predictions about individual behavior based on the assumption that people exploit opportunities to make themselves better off. The fact that different individuals make different choices when confronted with the same situation implies that this assumption is often violated.

True

Handicapped-designated parking spaces are an example of the market economy achieving efficiency.

True

If coffee and tea are viewed as substitutes in consumption, then an increase in the price of coffee will increase the demand for tea.

True

If the demand curve for clams is downward-sloping and the supply curve is upward-sloping, a quota that is set below the equilibrium quantity will result in a supply price higher than the demand price.

True

If the demand curve for clams is downward-sloping, a quota that is set below the equilibrium quantity will decrease the price that consumers pay for clams.

True

If the state of Minnesota established a price floor in the market for pumpkins that was double the current market-clearing price, this would lead to an inefficient number of pumpkins sold in Minnesota.

True

If the supply curve for clams is upward-sloping, a quota that is set below the equilibrium quantity will result in a supply price that is lower than the equilibrium price.

True

In 2003, Congress passed a tax cut. The country did NOT incur any opportunity cost from this decision.

True

In building models, economists often assume that opportunity costs don't matter.

True

Market equilibrium will always be efficient even if it is not equitable.

True

Market failure occurs when the pursuit of self-interest leads to bad results.

True

The principle that people will exploit opportunities to do what is best for others is the basis of all predictions by economists about individual behavior.

True

The supply curve for apartments in Oregon reflects how many apartments landlords are willing and able to offer for rent at a specific price.

True

The terms decrease in demand and decrease in quantity demanded can be used interchangeably.

True

All children have to be immunized against polio, measles, mumps, and other diseases. If you don't have enough money to pay for the immunizations, they will be provided free at the county health clinic. This statement best represents this economic concept:

When markets don't achieve efficiency, government intervention can improve society's welfare.

The federal government regulates how much carbon dioxide a factory can emit. This statement best represents this economic concept:

When markets don't achieve efficiency, government intervention can improve society's welfare.

An increase in supply is caused by:

a decrease in the price of resources used in production.

An effective price floor would result in:

a surplus of the good.

An effective price floor would result in:v

a surplus of the good.

Which of the following policies is MOST likely to reduce traffic congestion in a large metropolitan area because people usually exploit opportunities to make themselves better off?

a toll road that requires each car to pay a fee to enter the city center

If a 20% price increase generates a 20% decrease in quantity demanded, then this is _____ response.

a unit-elastic

Producer surplus is represented by the area _____ the supply curve and _____ the price.

above; below

Economists believe that resources should be used as efficiently as possible to:

achieve society's goals.

The problem of scarcity is confronted by:

all societies.

A trade-off between equity and efficiency may exist because of all of the following EXCEPT that:

allocating resources fairly may cause efficiency.

The trade-off between equity and efficiency occurs because:

allocating resources fairly may cause inefficiency.

An increase in supply is caused by:

an advancement in the technology for producing the good.

An effective price floor will lead to:

an excess supply or a surplus.

Reference: Ref 2-9 (Figure: Wine and Wheat) Look at the figure Wine and Wheat. If this economy is producing on the production possibility frontier, what would allow it to produce at point C?

an improvement in technology

Which of the following would shift the demand curve for new textbooks to the right?

an increase in college enrollment

Suppose the equilibrium rent for apartments in Boston is $1,600. If the city of Boston imposes a price ceiling of $1,200, there will be:

an increase in consumer surplus for Bostonians who can find apartments for $1,200.

All of the following would result in an increase in the supply of a good EXCEPT:

an increase in input prices.

A recent news story reported that the Organization of Petroleum Exporting Countries is expected to decrease the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of vacation travel. What would be the combined effect of these two events on the summer market for gasoline?

an increase in the price and an unpredictable change in the quantity

Rent controls in New York City cause all of the following EXCEPT:

an increase in the quantity supplied of rent-controlled apartments.

An increase in supply with no change in demand will lead to _____ in equilibrium quantity and _____ in equilibrium price.

an increase; a decrease

If resources are scarce, it means that they:

are insufficient to provide enough goods and services to satisfy all human material wants and needs.

An economy is said to have a comparative advantage in the production of a good if it can produce that good:

at a lower opportunity cost than another economy.

A choice made _____ is a choice whether to do a little more or a little less of something.

at the margin

Reference: Ref 3-4 (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. Given the equilibrium after a change in supply from S1 to S2:

at the old price of $2.50, there will be pressure for the price to fall.

Reference: Ref 5-20 (Figure: Price Controls) Look at the graph Price Controls. An effective price floor would be at price _____ and a _____ would result from the difference between points _____.

b; surplus; f and e

The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost of buying a burger is your enjoyment of the:

bagel.

Reference: Ref 5-20 (Figure: Price Controls) Look at the graph Price Controls. The consumer surplus lost to a price floor at point b is equal to the area:

bcge.

A bank offers two compensation plans to its tellers. Plan A provides an hourly wage of $12. Plan B offers $10 per hour plus additional compensation if customers sign up for a related bank product. If a teller chooses plan B, most likely this person would:

be more helpful to customers than if he or she chose plan A.

If an economy has to sacrifice increasing amounts of good X for each additional unit of good Y produced, then its production possibility frontier is:

bowed out.

A resource is anything that:

can be used in production.

Reference: Ref 2-2 (Figure: Guns and Butter) Look at the figure Guns and Butter. The combination of guns and butter at point H:

cannot be attained, given the level of technology and the factors of production available.

Suppose the Jamaican government sets coffee prices at $1 per pound, when the market price is $10. The government's actions will:

cause coffee shortages even in a coffee-rich country.

Good X and good Y are related goods. Holding everything else constant, if the price of X decreases and the demand for Y increases, X and Y are probably:

complements.

Good X and good Y are related. If the price of good X increases and the demand for good Y shifts left, these goods are:

complements.

Which of the following can best be considered to be a resource used in the production of computers?

computer engineers

If the market for grapefruit is in equilibrium without any outside intervention to change the equilibrium price:

consumer and producer surplus are maximized.

Some smaller retailers often go out of business when Walmart opens a new store. The most likely reason for this development is that:

consumers in those areas receive a larger consumer surplus from shopping at Walmart than from the smaller stores.

The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high. If the government imposes the price ceiling below the equilibrium price:

consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price.

You are analyzing a trade-off when you compare the _____ and _____ of doing something.

costs; benefits

Along a given downward-sloping demand curve, an increase in the price of a good will:

decrease consumer surplus.

An increase in the consumer surplus in the market for milkshakes may result from a(n) _____ in the _____ of milkshakes.

decrease consumer surplus.

Along the upward-sloping supply curve for brownies, a decrease in the price of brownies will:

decrease producer surplus.

Reference: Ref 4-27 (Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for pumpkins. Their willingness to pay for each pepper is shown in the table Pumpkin Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If Ben buys one more pumpkin and Diane sells one fewer pumpkin than in equilibrium, total surplus will _____ by _____.

decrease; $3 Quantity of Pumpkins Andy's willingness to pay Ben's willingness to pay Cindy's cost Diane's cost 1st pumpkin $12 $11 $ 3 $4 2nd pumpkin 10 9 5 6 3rd pumpkin 8 7 8 9 4th pumpkin 6 5 10 11

(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for pumpkins. Their willingness to pay for each pepper is shown in the table Pumpkin Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At the equilibrium price and quantity, Diane sells _____ pumpkins, and her producer surplus is _____.

decrease; $4

Reference: Ref 4-27 (Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for pumpkins. Their willingness to pay for each pepper is shown in the table Pumpkin Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If Andy buys one more pumpkin and Cindy sells one fewer pumpkin than in equilibrium, total surplus will _____ by _____.

decrease; $4

Reference: Ref 4-27 (Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for pumpkins. Their willingness to pay for each pepper is shown in the table Pumpkin Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If Cindy sells one fewer pumpkin and Diane sells one more pumpkin than in equilibrium, total surplus will _____ by _____.

decrease; $4

Reference: Ref 4-27 (Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for pumpkins. Their willingness to pay for each pepper is shown in the table Pumpkin Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If Cindy sells one more pumpkin and Diane sells one fewer pumpkin than in equilibrium, total surplus will _____ by _____.

decrease; $4

A new wonder diet that results in a dramatic weight loss sweeps through the United States. The key to the diet is to eat unlimited amounts of red meat (beef) but no poultry or carbohydrate-rich foods. As millions of Americans switch to the new diet, we can expect a(n) _____ in the _____ poultry, leading to a shift to the _____ in the _____ curve for poultry and _____ poultry prices.

decrease; demand for; left; demand; curve lower

Suppose a competitive market has a downward-sloping demand curve and a horizontal supply curve. If the supply curve shifts downward, equilibrium price will _____, equilibrium quantity will _____, consumer surplus will _____, and producer surplus will _____.

decrease; increase; increase; not change

Assuming that the supply curve of cupcakes is upward-sloping and demand for cupcakes decreases, there is a(n) _____ in _____ surplus.

decrease; producer

Reference: Ref 4-10 (Figure: Producer Surplus) Look at the figure Producer Surplus. When the price falls from $45 to $35, producer surplus _____ for a total producer surplus of _____.

decreases by $40; $60

A negative relationship between quantity demanded and price is called the law of:

demand.

Reference: Ref 2-5 (Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. The movement from curve 1 to curve 2 indicates:

economic growth.

If all of the opportunities to make someone better off (without making someone else worse off) have been exploited, an economy is:

efficient

If all of the opportunities to make someone better off (without making someone else worse off) have been exploited, an economy is:

efficient.

Reference: Ref 5-20 (Figure: Price Controls) Look at the graph Price Controls. A price floor has been set at point b. The area of deadweight loss that results from this price floor is:

egh.

Suppose a local community decides to give all of its citizens over age 60 a parking pass that will enable them to park in the front of parking lots. For people over 60, this policy is:

equitable but not efficient, since it applies to all citizens over 60.

Equity means that:

everyone gets his or her fair share of the goods and services produced.

Reference: Ref 5-32 (Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied and Quantity Demanded. A government-imposed price ceiling equal to $5 would result in:

excess demand.

The problem of determining what goods and services society should produce:

exists because there are not enough resources to provide all of the goods and services that people want.

If the opportunity cost of manufacturing machinery is higher in the United States than in Britain and the opportunity cost of manufacturing sweaters is lower in the United States than in Britain, then the United States will:

export sweaters to Britain and import machinery from Britain.

All of the following are possible reasons for market failure EXCEPT:

extremely high prices for medical care.

When the nations that constitute the Organization of Petroleum Exporting Countries (OPEC) restrict the supply of oil to increase their profits, the oil market:

fails because there is no longer an efficient allocation of resources.

Suppose the local real estate market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a large subdivision of new homes has just been completed. Given these two changes and assuming that real estate is a normal good, we can predict that the price of real estate will _____ and the quantity of real estate bought and sold will _____.

fall; rise or fall

Reference: Ref 4-1 (Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for Basketball Sneakers shows each player's willingness to pay for basketball sneakers. Assume that each player wants to buy at most, one pair of sneakers. If the price of basketball sneakers is $130, how many pairs will be purchased?

five

Reference: Ref 4-1 (Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for Basketball Sneakers shows each player's willingness to pay for basketball sneakers. Assume that each player wants to buy at most, one pair of sneakers. If the price of basketball sneakers is $60, how many pairs will be purchased?

five

Reference: Ref 4-27 (Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for pumpkins. Their willingness to pay for each pepper is shown in the table Pumpkin Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also shown. The equilibrium quantity of pumpkins is:

five

Reference: Ref 4-1 (Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for Basketball Sneakers shows each player's willingness to pay for basketball sneakers. Assume that each player wants to buy at most, one pair of sneakers. If the price of basketball sneakers is $100, how many pairs will be purchased?

four

Reference: Ref 2-11 (Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier. A movement from point C producing 12 cars and 16 computers per period to point B means a _____ of _____ cars and a _____ of _____ computers per period.

gain; 4; loss; 4

The circular-flow diagram represents the market for _____ and the market for _____.

goods and services; factors

In the circular-flow diagram households buy _____ in the _____ market.

goods and services; product

Hugo Chávez was the president of Venezuela. Venezuela is a major producer of oil products, which remain the keystone of Venezuela's economy. Suppose President Chávez wanted to increase his popularity with the citizens of Venezuela and enacted a government policy to reduce the price of gasoline sold at state-owned gas stations to 50% of the previous price. Assuming a downward-sloping demand curve for gasoline, in theory, this policy would result in the quantity of gasoline demanded to be _____ the quantity of gasoline supplied.

greater than

The cross-price elasticity of demand of substitute goods is:

greater than 0.

Reference: Ref 5-33 (Figure: Market I) Look at the figure Market I. A price floor of $5 imposed on this market would:

have no effect.

Manny is attending college and majoring in economics. By doing so, Manny is improving his

human capital.

Manny is attending college and majoring in economics. By doing so, Manny is improving his:

human capital.

If Allison drives to a large city 100 miles from her small community to do her back-to-school shopping, this will:

hurt Allison's community because Allison's spending will be income for people in the large city

If Allison drives to a large city 100 miles from her small community to do her back-to-school shopping, this will:

hurt Allison's community because Allison's spending will be income for people in the large city.

By definition, in a black market, goods or services are bought and sold:

illegally.

Which of the following methods of encouraging recycling is likely to be MOST effective because people usually exploit opportunities to make themselves better off?

imposing a tax per unit of garbage generated

Because people usually exploit opportunities to make themselves better off, which of the following methods of reducing pollution is likely to be most effective?

imposing a tax per unit of pollution generated

In an attempt to reduce shooting deaths, some cities have offered money to people who turn in illegal guns. This program is an example of the government using _____ to influence behavior.

incentives

In most cases, economic efficiency is achieved through:

incentives built into a market economy.

An increase in _____ will have an ambiguous (uncertain) effect on price.

income

Reference: Ref 4-28 (Figure: The Gains from Trade) Look at the figure The Gains from Trade. What is the total surplus in this market when the demand curve is D2 and the market is in equilibrium?

increases by $27.50.

Along a given supply curve, an increase in the price of a good will:

increase producer surplus.

Assuming that the supply curve of cupcakes is upward-sloping and demand for cupcakes decreases, there is a(n) _____ in _____ surplus.

increase producer surplus.

Assume that corn is an input in the production of beef but not in the production of pork. Further, beef and pork are substitutes in consumption. A decrease in the price of corn will _____ the supply of beef and _____ the demand for pork.

increase; decrease

A new wonder diet that results in a dramatic weight loss sweeps through the United States. The key to the diet is to eat unlimited amounts of red meat (beef) but no poultry or carbohydrate-rich foods. As millions of Americans switch to the new diet, we can expect a(n) _____ in the _____ beef, leading to a shift to the _____ in the _____ curve for beef and _____ beef prices.

increase; demand for; right; demand; higher

An increase in the consumer surplus in the market for milkshakes may result from a(n) _____ in the _____ of milkshakes.

increase; supply

You are planning to study eight hours this week for your economics final and are considering studying a ninth hour. You should:

make your decision based on the cost of the next best alternative use of your time compared to the benefit of one more hour of study.

The concept of the margin deals with:

making incremental choices.

The market for corn in Kansas is considered to be competitive. This means there are _____ buyers and _____ sellers of corn in Kansas.

many; many

Your neighbor is mowing her yard one afternoon when she stops to have some lemonade. She drinks one glass and is considering having a second glass. This is an example of

marginal analysis.

Your neighbor is mowing her yard one afternoon when she stops to have some lemonade. She drinks one glass and is considering having a second glass. This is an example of:

marginal analysis.

The lack of property rights and inaccuracy of prices as economic signals often lead to:

market failure.

Which of the following is a key factor in the effectiveness of well-functioning markets?

market failure.

Market failure refers to a situation in which:

markets fail to reach an efficient outcome.

The existence of government intervention often suggests that:

markets may not be able to provide for efficient results all of the time.

The incentives built into the market economy ensure that resources are put to good use and that opportunities to make people better off are not wasted. This means that:

markets usually lead to efficiency.

If the state government allocates additional spending on education, the opportunity cost is:

measured in terms of the best alternative uses for that money.

The study of a single firm and how it determines prices falls under the study of:

microeconomics.

Which of the following is NOT a resource in the production of rice?

money

Assume an economy is operating on its production possibility frontier, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods:

must decrease.

The phrase gains from trade refers to the:

ncrease in total output that is realized when individuals specialize in particular tasks and trade with each other.

Reference: Ref 5-9 (Figure: Supply and Demand) Look at the figure Supply and Demand. A price ceiling of P1 causes:

no change to the market.

Equilibrium exists when:

no individual has an incentive to change his or her behavior.

When a market is in equilibrium and there is no outside intervention to change the equilibrium price:

no mutually beneficial trades are missed.

Reference: Ref 4-1 (Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for Basketball Sneakers shows each player's willingness to pay for basketball sneakers. Assume that each player wants to buy at most, one pair of sneakers. If the price of basketball sneakers is $180, how many pairs will be purchased?

none

If the market for buffalo meat is in equilibrium, the price of buffalo meat will probably _____ in the near future.

not change

An economy is efficient if it is:

not possible to produce more of one good without producing less of another good.

Individuals gain from trade because:

of specialization in production.

At various times, the nations that constitute the Organization of Petroleum Exporting Countries (OPEC) have restricted the supply of oil to increase their profits. This is an example of:

one party preventing mutually beneficial trades in an attempt to capture a greater share of resources for itself.

Hugo Chávez was the president of Venezuela. Venezuela is a major producer of oil products, which remain the keystone of Venezuela's economy. Suppose President Chávez wanted to increase his popularity with the citizens of Venezuela and enacted a government policy to reduce the price of gasoline sold at state-owned gas stations to 50 percent of the previous price. This policy is called a:

price ceiling.

The dictator of a small country restricts the price of cars to an amount less than or equal to $1,200 (a price below the equilibrium price for cars). Such a policy would set a:

price ceiling.

The dictator of a small country restricts the price of cars to an amount less than or equal to $1,200 (a price below the equilibrium price for cars). Such a policy would set a:

price ceilings.

When price controls take the form of maximum prices set below the equilibrium price, they are:

price ceilings.

Reference: Ref 5-18 (Figure: The Market for Spanish Textbooks) Look at the figure The Market for Spanish Textbooks. Suppose the government believes the producers of Spanish textbooks are not profitable and it wants to make sure textbook producers are profitable. It could impose a control called a _____, and for it to be binding, one possible price would be _____.

price floor; $90

Suppose that more police and security workers become aware that wearing bulletproof vests can protect them from injury and decide to start wearing bulletproof vests. At the same time, the price of ceramics used to produce the vests falls. The equilibrium price of bulletproof vests _____ and the equilibrium quantity produced _____.

probably changes, but in an ambiguous direction; increases

Maria wants to get rid of her bookshelf. She is willing to give it away, but her neighbor offers to pay $30 for it. Maria takes a:

producer surplus gain.

Substitutes in production suggest that a producer with a fixed set of resources initially will need to reduce production of one good when the producer:

produces more of the other good.

Which is NOT an example of a resource?

production

A popular train station has free parking for commuters who take the train. This often results in many people being unable to find a parking spot and missing their train. To solve this problem, all commuters should be:

required to pay for parking.

We have to make choices because:

resources are scarce.

Suppose the market for gasoline is in equilibrium. You have heard that the price of crude oil is falling because of new oil discoveries. You are also aware that the number of car and truck drivers is steadily rising. Knowing this, you predict that the price of gasoline will _____ and the quantity of gasoline bought and sold will _____.

rise or fall; rise

When we are forced to make choices, we are facing the concept of:

scarcity

When we are forced to make choices, we are facing the concept of:

scarcity.

The circular-flow diagram illustrates how firms _____ goods and services and _____ factors of production.

sell; buy

In the circular-flow diagram firms receive money for _____ in the _____ market.

selling goods and services; product

Increases in resources or improvements in technology will tend to cause a society's production possibility frontier to:

shift outward.

Reference: Ref 3-6 (Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. A temporary price of $4 in this market would result in a _____ of _____ bushels.

shortage; 4,000

A price ceiling is likely to result in a persistent _____, a transfer of surplus from _____, and _____ deadweight loss.

shortage; producers to consumers; some

When building a model, economists:

simplify reality to highlight what really matters.

A decrease in supply is caused by:

suppliers' expectations of higher prices in the future.

The government might impose a price floor if _____ can make a strong moral or political argument for _____ prices.

suppliers; higher

You notice that the price of Blu-ray players falls and the quantity of Blu-ray players sold increases. This set of observations can be the result of the _____ Blu-ray players shifting to the _____.

supply of; right

It is certain that the equilibrium quantity will fall when:

supply shifts to the left and demand stays the same.

Reference: Ref 3-6 (Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. If a price of $8 temporarily exists in this market, a _____ of _____ bushels will result.

surplus; 4,000

Reference: Ref 5-15 (Figure: The Market for English Textbooks) Look at the figure The Market for English Textbooks. With a binding price floor at $90, the market outcome would be a _____ of _____ textbooks.

surplus; 45

The total producer surplus for a good can be calculated in all of the following ways EXCEPT as:

the area below the supply curve for the good up to the quantity of the good sold

The total producer surplus for a good can be calculated in all of the following ways EXCEPT as:

the area below the supply curve for the good up to the quantity of the good sold.

Suppose the United States removes sugar quotas and the market price of sugar drops. If the demand curve for candy bars is downward-sloping, in the candy bar market we would expect:

the consumer surplus to increase.

The market for soybeans is initially in equilibrium. Because of mad cow disease, producers decide to replace bone meal with soybeans in cattle feed. The likely effect is that:

the equilibrium price and quantity of soybeans will rise.

Specialization and trade usually lead to:

the exchange of goods and services in markets.

A persistent shortage may occur if:

the government imposes a price ceiling.

Reference: Ref 5-32 (Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied and Quantity Demanded. If a price ceiling of $10 is imposed in this market:

the quantity demanded will be greater than the quantity supplied.

How people choose among the alternatives available to them is:

the study of microeconomics.

Total surplus is:

the sum of consumer and producer surplus.

The total surplus in a market is:

the sum of consumer surplus and producer surplus.

Alex is willing to buy the last ticket to the Billy Bragg concert for $15, while Jake is willing to pay $25. Alex is first in line and buys a ticket for $15. He then resells his ticket to Jake for $20. By reselling the ticket instead of going to the concert himself, Alex caused:

the sum of the consumer and producer surplus to increase.

Suppose the equilibrium rent for apartments in Boston is $1,600. If the city of Boston imposes a price ceiling of $1,200, there will be:

the sum of the consumer and producer surplus to increase.

It is certain that the equilibrium quantity will rise when:

the supply curve and the demand curve both shift to the right.

It is certain that the equilibrium price will fall when:

the supply curve shifts to the right and the demand curve shifts to the left.

Everyone benefits from street lighting, yet the marginal benefit to any one individual usually falls short of the marginal cost. This is an example of:

the unsuitability of some goods for efficient management by markets.

One parent picks up the child from day care while the other parent goes to the grocery store and begins to make dinner. This is an example of the principle that:

there are gains from trade.

Market equilibrium occurs when:

there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.

Reference: Ref 4-1 (Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for Basketball Sneakers shows each player's willingness to pay for basketball sneakers. Assume that each player wants to buy at most, one pair of sneakers. If the price of basketball sneakers is $130, how many pairs will be purchased?

two

While buying refreshments for an upcoming party, you notice that a six-pack of Americana Beer costs $2 and a six-pack of Bavarian Beer costs $4. You buy the six-pack of Bavarian Beer, although you wonder if maybe two six-packs of Americana Beer would have been a better choice. The opportunity cost of the Bavarian Beer is:

two six-packs of Americana Beer.

Adie wants to take some online classes this semester. She is willing to pay $1,000 for the first class, $800 for the second, $700 for the third, and $500 for the fourth. If online classes cost $750, Adie will take _____ online classes, and her consumer surplus will equal _____.

two; $300

Reference: Ref 4-27 (Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for pumpkins. Their willingness to pay for each pepper is shown in the table Pumpkin Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At the equilibrium price and quantity, Diane sells _____ pumpkins, and her producer surplus is _____.

two; $6

The models that economists construct:

usually make simplifying assumptions.

For an economist, the cost of something is:

what you gave up to get it.

Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

whatever she would have purchased with the $10,000 plus whatever she would have earned had she not been in college.

The best measure of the opportunity cost of any choice is:

whatever you have given up to make that choice, even if no monetary costs are involved.

The government of a small town has decided to ban smoking in all restaurants, stores, and government offices. This is an example of the principle that:

when markets fail to achieve efficiency, government intervention can improve society's welfare.

If the price is above the equilibrium price in the market for grapefruit, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus:

will decrease.

If the price is below the equilibrium price in the market for grapefruit, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus:

will decrease.

If there is a decrease in demand, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus:

will decrease.

If there is a decrease in supply, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus:

will decrease.

Coffee and tea are substitutes in consumption. If there is an increase in the price of coffee, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus in the tea market:

will increase.

If there is an increase in demand, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus:

will increase.

If there is an increase in supply, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus:

will increase.

Which of the following is a key factor in the effectiveness of well-functioning markets?

your right to use and dispose of your private property as you see fit

Reference: Ref 6-13 (Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $8, total revenue is _____. If the price is $7, total revenue is _____.

$16; $21

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. If the price is $1.10, total revenue is _____, and if the price is $0.95, total revenue is _____.

$209; $204.25

Reference: Ref 6-3 (Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point S equals the:

area 0PSM.

Reference: Ref 6-3 (Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point V equals the:

area 0TVN.

An important determinant of the price elasticity of demand is the:

availability of substitutes.

If a good is a necessity with few substitutes, all others things equal, then demand will tend to:

be less price-elastic.

Reference: Ref 6-4 (Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?

c

Other things being equal, the price elasticity of demand for a product will be lower:

if there are few or no substitutes available.

A shirt manufacturer sold 10 dozen shirts per day at $4 per shirt but sold 15 dozen shirts per day at $3 per shirt. The price elasticity of demand (by the midpoint method) is:

greater than 1 but less than 3.

The pair of items that is most likely to have a negative cross-price elasticity of demand is:

hamburgers and ketchup.

When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the quantity demanded decreases from 220 to 180. If the price is $1.55, total revenue is _____, and if the price is $2.00, total revenue is _____.

$341; $360

Reference: Ref 6-2 (Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $0.75 and $0.50?

0.33

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, then the price elasticity of demand (by the midpoint method) is:

0.5.

Reference: Ref 6-2 (Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.25 and $1.00?

0.82

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total expenditures on gasoline in the short run, all other things equal?

Quantity demanded will not change much, but total expenditures will rise.

The price elasticity of demand for ground beef has been estimated to be 1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on ground beef, all other things equal?

Total expenditures will remain unchanged.

The price elasticity of demand for fresh zucchini has been estimated to be 2.25. A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini. Which of the following best describes how this will affect total expenditures on zucchini, all other things equal?

Total expenditures will rise.

The price elasticity of demand for gasoline in the long run has been estimated to be 1.5. If an extended war in the Middle East caused the price of oil (from which gasoline is made) to increase and remain high for a decade, how would that affect total expenditures on gasoline in the long run, all other things equal?

Total expenditures would fall.

A perfectly inelastic demand curve for insulin would mean that the quantity demanded does NOT respond at all to changes in the price of insulin.

True

If demand is perfectly inelastic, changes in price leave total revenue unchanged.

True

If funeral homes discover that the price elasticity of demand for caskets equals 0.55 at the current price, funeral homes should increase prices to increase revenue.

True

Sarah has been told she has only one week to finish some pottery for a show. Sarah has exhausted her supply of clay, and new clay is absolutely necessary for finishing her products. For Sarah, the price elasticity of demand for new clay is elastic.

True

The director of River City Public Transport recently stated, "The last seven times we increased bus fares, revenues dropped." This remark suggests the demand for bus service is elastic.

True

The price of pretzels increases and the demand for tortilla chips decreases, so we can assume that these two goods are:

complementary.

The price of coffee increases by 10%, and as a result, Alex purchases fewer doughnuts. For Alex, coffee and doughnuts are:

complements

Reference: Ref 6-16 (Figure: The Linear Demand Curve II) Look at the figure Linear Demand Curve II. If price was initially set at $8 and then increased to $10, total revenue would:

decrease, as the price effect is dominated by the quantity effect.

One would expect to see the supply become more price _____ as harvest season approaches and crops are being brought in from the fields.

elastic

A rancher in Oklahoma decides to raise the price of her beef by 19% over the prevailing market price. If the demand for beef is perfectly elastic, this rancher's quantity demanded will:

fall to 0.

A men's tie store sold an average of 30 ties per day at $5 per tie. The same store sold 60 of the same ties per day at $3 per tie. In this case, the price elasticity of demand (by the midpoint method) is:

greater than 1 but less than 3.

In the short run, the price elasticity of supply for foods low in carbohydrates is lower than it will be in the long run because:

in the short run, food producers do not have much time to respond to changes in demand.

Decreases in input costs and a longer time since a price change will tend to:

increase the price elasticity of supply.

Reference: Ref 6-15 (Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. If you increase the price of your scarves from $7 to $8, your total revenue will _____, and you notice that your price elasticity of demand is _____.

increase; inelastic

You manage a nightclub, and lately revenues have been disappointing. Your bouncer suggests that raising drink prices will increase revenues, but your bartender suggests that decreasing drink prices will increase revenues. You aren't sure who is right, but you do know that your bouncer thinks the demand for drinks is _____ and your bartender thinks the demand for drinks is _____.

inelastic; elastic

If two goods are complementary, we can assume that the cross-price elasticity of demand for these goods is:

less than 0.

If the price elasticity of supply is:

less than 1, then the supply is price-inelastic.

Kayla and Jada are roommates in New York City. Both Kayla and Jada recently received raises. Kayla now buys more album downloads than before, but Jada buys fewer. Kayla behaves as if album downloads are _____ goods, and Jada's income elasticity of demand for album downloads is _____.

normal; negative

When Joe's income is $100 per week, he spends $20 per week on pizza. When his income rises to $110 per week, he spends $25 per week on pizza. If the price of pizza remains constant, this information implies that for Joe:

pizza is a normal good and a luxury.

If a change in price causes total revenue to change in the same direction, we can conclude that the demand is:

price inelastic.

Reference: Ref 6-3 (Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. The change in total revenue resulting from a change in price from P to T suggests that demand is:

price-elastic.

The supply curve for a good will be more elastic if:

production inputs are readily available at a relatively low cost.

The university president believes that increasing student tuition by 5% will increase revenues. If the president is correct that revenues will increase, then the tuition increase will _____ the number of students enrolling by _____.

reduce; less than 5%

The university hopes to raise more revenue by increasing parking fees. This plan will work only if:

the price effect is larger than the quantity effect.

When the price goes down, the quantity demanded goes up. The price elasticity of demand measures:

the responsiveness of the quantity change to the price change.

There is one gas station in a small rural town. The owner of the station claims that he will sell the same quantity of gas no matter how high or low the price. If he is correct in this assertion, the demand curve for gas at his station must be _____, with a price elasticity of _____.

vertical; zero