ECO

Economists refer to the payment to labor as

wages.

Producer surplus is defined as the gap between the supply curve and the market price.

True

Which of these results in a higher standard of living? smaller level of international trade

free trade

Which statement is NOT an illustration of opportunity cost? If a person studies for her English class, she won't have as much time to write creative poetry.

The more a person works at her job, the more leisure time she has.

The field of economics that focuses on decision making by individuals, businesses, industries, and governments is called

microeconomics.

(Figure: Determining Surplus and Loss) In the graph, producer surplus is _____ in equilibrium and _____ at a price of $12.

$120; $170

(Figure: Determining Surplus and Loss) In the graph, which price would NOT allow for a binding price floor?

$6

In the graph, calculate the value of producer surplus in this market.

$60

(Figure: Corn and Oil in the United States and the United Kingdom) Refer to the graphs for the United States and the United Kingdom. If the starting point is a, what is the opportunity cost of the United Kingdom producing one more barrel of oil?

0.5 bushel of corn

(Figure: Individual and Market Demand Curves) According to the graph, the market quantity demanded at $10 is

15 units

(Figure: Interpreting a Market Graph) If the price of leather used to make shoes falls such that the supply of shoes increases by 20 shoes at every price, then the amount of shoes supplied at a price of $60 before the change would be _____ pairs, and after the change, it would be _____ pairs.

30; 50

the table show the demand schedule for threee...

4th

At an amusement park, Sue achieves an enjoyment value of 10 on her first roller coaster ride and an enjoyment value of 6 on her second ride. Her marginal benefit from her second ride is

6.

Which example represents incentives for decisions?

All of these are incentives.

Which of these is NOT an example of market failure?

Competition leads firms to provide products at the lowest possible price.

The concepts of absolute and comparative advantage were developed by

David Ricardo.

(Figure: Determining Surplus 3) In the graph, producer surplus is $280.

False

(Figure: Determining Surplus and Loss) In the graph, $14 would allow for a binding price ceiling.

False

A change in preferences causes a movement along the demand curve. False True

False

A country has to be able to produce both goods at a faster rate in order to have an absolute advantage.

False

A market is a physical location that enables buyers and sellers to interact and transact with one another.

False

Suppose that a customer's willingness-to-pay for a product is $5, and the seller's willingness-to-sell is $2. If the negotiated price is $3, producer surplus is greater than consumer surplus.

False

Which statement about economic models is FALSE?

In practice, it is easy for an economist to isolate economic variables.

A leather company produces shoes and belts. What will the company do if it expects the price of shoes to rise in the near future?

It will move resources from belt production to shoe production, thereby decreasing the supply of belts.

If bagels and doughnuts are substitute goods, then which scenario is likely to occur if the price of bagels is reduced?

The demand curve for doughnuts will shift to the left.

When the supply of a product rises, ceteris paribus, what happens to firms' willingness-to-sell and to the amount of producer surplus?

They both increase.

(Figure: Determining Surplus 2) In the graph, consumer surplus is $15.

True

A lack of competition results in deadweight loss. True False

True

All output combinations on the production possibilities frontier are attainable.

True

An increase in the price of a good will cause a decrease in the demand for a complementary good.

True

recession?

a

In the market for electric vehicles (EVs), more vehicle manufacturers are releasing electric models at the same time that consumer preferences are changing toward EVs. If manufacturers are releasing new electric models at a faster rate than consumer preferences are changing toward EVs, we can expect

a decrease in the equilibrium price and an increase in the equilibrium quantity of EVs.

Marginal analysis would put an emphasis on _____ costs and benefits.

additional

In economics, the term "land" includes

all natural resources.

Which factors would not shift the demand curve for ice cream?

an increase in the price of milk, a key ingredient in ice cream

Economic growth is driven by

an increase in trade.

A decrease in the quantity supplied of iPads is caused by a(n)

drop in the price of iPads.

The supply curve slopes up and to the right because

due to increasing opportunity costs, producers must charge more to produce additional units in order to cover their costs.

Which factor encourages economic growth?

education

The concept of scarcity

exists in all societies.

(Figure: Supply and Demand for Shoes) If the price of shoes is $20, then the market

experiences a shortage of shoes.

A decrease in demand causes the equilibrium price to _____ and the equilibrium quantity to _____. rise; fall rise; rise fall; rise fall; fall

fall; fall

An increase in supply causes the equilibrium price to _____ and the equilibrium quantity to _____.

fall; rise

The opportunity costs of attending college do NOT include

food expenditures.

A decrease in the supply of a good causes a(n) increase in the equilibrium price and quantity. increase in equilibrium quantity and a decrease in the equilibrium price. decrease in the equilibrium price and quantity. increase in the equilibrium price and a decrease in equilibrium quantity.

increase in the equilibrium price and a decrease in equilibrium quantity.

For a country to experience economic growth, the country must

increase inputs.

Resources are

limited, but wants are unlimited.

If a price floor is set above the equilibrium price in the market, consumer surplus will be

lower than it would be without the price floor.

International finance is generally studied in

macroeconomics.

Economists believe that

making information available to market participants improves market function

In which market is government most likely to intervene to prevent a market failure?

market for college education

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a

model

(Figure: PPF of Econia (a small nation)) Looking at the production possibilities frontier (PPF) of Econia, which changes in production would leave the citizens of Econia with a lower level of welfare or satisfaction?

movement from D to E

A change from a technically or productively inefficient mix to an efficient mix of output would BEST be represented with a production possibilities frontier (PPF) as a _____ the PPF.

movement from inside the PPF onto

Which market is most likely to sell a virtual good?

online gaming marketplace

The government sets a maximum price of gasoline at $2 a gallon. This is an example of a

price ceiling.

In the market economy, the primary channel through which buyers and sellers communicate with each other is

price.

The practical constraints on trade include all of these EXCEPT

production possibilities frontiers for nations are linear.

Which topic is MOST likely to be studied in a macroeconomics course?

recession

In the market for online tutoring, there is an increase in the supply of online tutors during finals week, but there is an even larger increase in the demand for online tutors. These events will cause the equilibrium price of online tutoring to _____ and the equilibrium quantity to _____.

rise; rise

If a price ceiling is set below the equilibrium price in the market, producer surplus will be

smaller than it would be without the price ceiling.

Which pair MOST likely includes substitute goods?

soft drinks and lemonade

David Ricardo

suggested that countries would benefit from trade.

Wheat is the main input in the production of flour. If the price of wheat increases, all else equal, we would expect the

supply of flour to decrease.

(Figure: Understanding Price Ceilings and Floors) In the graph, if the government sets a price floor of $75, there is a

surplus of 600 units.

(Table) Germany has a comparative advantage in producing

sweaters only.

In the market for medicine, if surplus is transferred from producers to consumers, from the standpoint of efficiency

the current quantity of medicine is too low.

Which factor would increase demand for a given good?

the expectation that the price will increase in the near future

(Figure: Determining Surplus) In the graph, which shape represents consumer surplus?

triangle hik

200 Reasons to study economics include all of these EXCEPT that you

will learn exactly how to invest your cash in the short term for the highest return on investment

A country's choice of producing capital goods versus consumption goods today

would expand PPF more over time if more capital goods are produced today.

How large is deadweight loss in equilibrium?

zero

Which price floor for milk would not cause a surplus in the market if the equilibrium price for milk is $3.60?

$3.50

Suppose the market price is $5. The buyer who buys the first unit of output has a willingness-to-pay equal to $10; the buyer who buys the second unit of output has a willingness-to-pay equal to $9; and the buyer who buys the third unit of output has a willingness-to-pay equal to $8. Total consumer surplus is

$12. ( lay gia sau tru gia goc roi cong lai)

Admission prices to Dollywood are $50 for a one-day ticket, $80 for a two-day ticket, and $100 for an annual pass. Based on these prices, the marginal cost of visiting Dollywood the second day is _____, the third day is _____, and the fourth day is _____.

$30; $20; $0

(Figure: Determining Surplus and Loss) In the graph, which price would allow for a binding price ceiling?

$5

(Figure: Understanding Surplus and Efficiency) In the graph, what is the sum of consumer and producer surplus?

$50

(Table: Production Possibilities Schedule) In the table, if society wants to increase production of HDTVs from 1,000 to 2,000 units, the opportunity cost of doing so will be _____ iPads. iPads HDTVs 5,000 0 4,500 1,000 3,500 2,000 2,000 3,000 0 4,000 500 3,500 1,000 4,500

1,000

The government can always successfully intervene in the case of market failure.

False

Positive questions are questions about how things ought to be.

False

Prices typically contain more useful information for buyers than for sellers.

False

When countries specialize in producing a particular product and trade products they don't produce, it will generally lead to a worse outcome than if every country produces all the products as best they can.

False

a situation in which output is produced at the lowest possible cost is called allocative efficienly

False

"Laissez-faire" is a _____ term that means _____.

French; "let it be"

Which headline would be LEAST likely to be studied in macroeconomics?

GM Expands Car Sales in China

Which is NOT one of the basic economic questions that each society must answer?

How much do we pay those who produce the goods and services?

The government sets regulations to improve safety for factory workers. This relates to which basic economic question?

How should goods and services be produced?

Which statement does NOT involve thinking at the margin?

Sally worked eight hours today.

Using the productivity rates for Spain and Portugal, which statement is TRUE?

Spain has a comparative advantage in olives.

Which would BEST represent a positive statement?

Taxes on sugary drinks cause people to drink less of them.

Which situation deals more with equity than efficiency?

The Red Sox sign a star player for $35 million a year, which is more than 10 times the average salary of the rest of the team.

One of the most important ingredients in bubble tea is the tapioca pearls that are added to the tea. If the price of tapioca flour increases, what will happen to the supply of bubble tea, all else being equal?

The supply of bubble tea will decrease.

If the producers of cotton shirts face higher cotton prices, which scenario is likely to occur?

The supply of cotton shirts decreases, the equilibrium price of cotton shirts rises, and the equilibrium quantity falls.

Which item would be considered a complementary good for a kayak?

a life jacket

(Table: Production Possibilities Schedule) In the table, a combination of 3,500 iPads and 2,000 HDTVs is iPads HDTVs 5,000 0 4,500 1,000 3,500 2,000 2,000 3,000 0 4,000

a point on the production possibilities frontier.

(Figure: Bread and Honey) In the graph, point b represents a point of inefficiency. a better economic situation than point a. a point where all of society's resources are fully employed. economic growth.

a point where all of society's resources are fully employed.

Deadweight loss reduces

consumer surplus and producer surplus.

Suppose that a customer's willingness-to-pay for a product is $5, and the seller's willingness-to-sell is $2. If the negotiated price is $3

consumer surplus is greater than producer surplus.

Which does NOT represent an increase in the level of human resources available to an economy?

decrease in the unemployment rate

A manufacturer of plastic canoes and fiberglass kayaks is experiencing an increase in the price of kayaks in the marketplace, while the price of oil used to make plastic is rising. These two events are MOST likely to lead to a(n)

increase in the quantity supplied of kayaks and a decrease in the supply of canoes.

Which scenario is the MOST likely effect of a decrease in the price of milk on the market for cereal?

increased equilibrium price of cereal and increased equilibrium quantity of cereal

If a country has few resources

it will still have a comparative advantage in a good or service.

Economists generally have _____ to say about equity than efficiency.

less

Markets differ in

location, products, and size.

Which of these would be considered a public good?

national defense

The law of comparative advantage suggests that

nations can benefit if they trade with each other.

When an economy uses the most efficient means of farming to grow as much corn as possible, this economy has achieved

production efficiency but not necessarily allocative efficiency

Quantity supplied is the

quantity of goods that producers are willing and able to sell at a given price.

(Figure: Interpreting a Market Graph) If the price of shoes is $60 per pair, the _____ will be 30 pairs of shoes.

quantity supplied

To say that economics is a way of thinking about how people make rational decisions means that people

respond to incentives.

During the 2007-2009 recession, consumer spending on dogs and cats

rose, even though national income declined.

A decrease in population in a market will cause a shift in the demand curve to the left. movement up the demand curve. shift in the demand curve to the right. movement down the demand curve.

shift in the demand curve to the left.

Which action will NOT shift a production possibilities frontier curve outward?

shifting preferences of consumers to cheaper products

The law of supply states that if price fall, producers will offer fewers products for the Market

True

Production levels to the right of the production possibilities

unattainable.

Positive statements

involve understanding basic facts.

While Steve is cleaning out his garage, he finds an old surfboard that he no longer needs. As he walks to the dumpster to throw it out, his neighbor John asks if he could have it. John offers Steve a 6-pack of beer (worth $10) in exchange, which Steve happily accepts. Steve has achieved a producer surplus of

$10, the value of the beer he received.

If a student were not studying economics, he could be doing one of the following: sleeping in (which he values at $5), playing cards with his friends (which he values at $10), or working (he would have earned an extra $8). The opportunity cost of studying economics is therefore

$10. (highest price)

In the following graph, calculate the value of producer surplus in this market. $6 $180 $90 $240

$90

Suppose that a store sells candy bars for $0.89 for one and $1.50 for two. The marginal cost of the second candy bar is

(1.50-0.89)=0.61

Which situation involves an external cost?

Alma lives next to a freeway and the noise wakes her up every morning, against her wishes, at six o'clock.

Which statement explains why free markets fail to produce public goods? Consumers do not want to buy the products because each one hopes that someone else will buy it and then all consumers will be able to have the product at no personal cost. Firms do not want to produce the goods because they believe external costs will eat up their profits. Firms do not want to produce the goods because they fear competition will drive the price down below costs. Consumers do not want to buy the goods because the price is higher than the value of benefits they would receive.

Consumers do not want to buy the products because each one hopes that someone else will buy it and then all consumers will be able to have the product at no personal cost.

Which statement about economic models is TRUE?

Economists hold all other variables constant in order to see the impact of one particular variable.

In the market for running shoes, suppose the cost of rubber used in their production rises, while at the same time the popularity of running as a sport increases. If the latter effect is stronger in magnitude, what is the change in equilibrium price and quantity?

Equilibrium price and quantity both rise.

A rich person does not experience scarcity.

False

A surplus exists when the price is below the equilibrium price.

False

According to economic theory, adequate information is not necessary for a market to work efficiently.

False

An increase in supply causes the supply curve to shift upward.

False

An increase in the price of Lay's potato chips causes the supply curve for this product to shift up and to the left.

False

As income increases, consumers are less likely to purchase normal goods.

False

Complex models are always better than simple ones.

False

Economic models must fully reflect reality.

False

Much of the economic growth we have seen over the past century has been due to population growth.

False

Opportunity cost involves nonmonetary costs rather than monetary costs.

False

Production efficiency is defined as producing the mix of goods and services most desired by society.

False

Scarcity occurs when an individual's resources exceed his wants.

False

The French term for "let it be" is ceteris paribus.

False

(Figure: Biscuits and Cookies PPFs) Looking at Greg and Melissa's production possibilities frontiers (PPFs), what production and trade situation would allow both Greg and Melissa to consume a combination of biscuits and cookies outside their PPF?

Greg produces 200 cookies, Melissa produces 160 biscuits, and Greg trades 100 cookies in exchange for 60 biscuits.

Which statement illustrates what an effective price ceiling does to a market price?

Like a helium balloon bumps against a room ceiling, unable to rise to the level to which it would go if it were outside, price ceilings hold prices down below equilibrium.

Imagine two countries with identical endowments of resources. Using all its resources, Broland can produce 5,000 books or 8,000 forks. Using the same resources, Nomia could produce 4,000 books or 7,000 forks. Which country has a comparative advantage producing forks?

Nomia, because it gives up 0.57 book for each fork produced

_____ occur(s) when goods are produced at the lowest possible cost, and _____ occur(s) when individuals who desire a product the most receive those goods and services.

Production efficiency; allocative efficiency

Joe fixes cars in his driveway to earn income. He works late at night and makes so much noise that Moe, his neighbor across the street, cannot sleep. What can be said about Joe as a producer?

Too much is being produced relative to the socially optimal amount.

(Figure: Understanding Price Ceilings and Floors) In the graph, if the government sets a maximum price of $25, there is a shortage of 600 units.

True

At times, there are conflicts between market outcomes that are efficient and outcomes that society deems fair.

True

Economists create simplistic models in order to explain complex economic topics.

True

Economists look for rational responses to incentives.

True

Economists often call our market economy the price system.

True

Government policy to achieve high employment may cause inflation to rise too quickly

True

If the price of guitar amplifiers increases, ceteris paribus, at the new price, consumer surplus for electric guitars falls.

True

Macroeconomics is concerned about the broader issues in the economy, such as inflation, unemployment, and national output of goods and services.

True

One country has a comparative advantage in producing a good if its opportunity cost to produce that good is lower than that of another country.

True

Open access to information is necessary in order for a market to work efficiently.

True

What are the three basic economic questions each society must answer?

What to produce? How to produce? For whom to produce?

Which of these would NOT be considered a factor of production?

a bank loan used to start a new business

Which situation would MOST likely lead to an import of copper into a certain country?

a comparative advantage in the production of copper by other nations

Which factor would NOT change the demand for sea kayak tours?

a decrease in the price of a sea kayak tour

Which factor would NOT cause the demand curve for green tea to shift to the right?

a decrease in the price of green tea

If a city government were to impose a price ceiling to bring down rental prices of apartments in the downtown area quantity demanded would decrease. quantity supplied would increase. supply would increase. an illegal rental market would likely emerge.

an illegal rental market would likely emerge.

Before a house is sold, the buyer usually inspects the property for problems. This reduces which cause of market failure?

asymmetric information

(Figure: Determining Surplus and Loss) In the graph, if the government sets a minimum price of $12, this is an example of a(n)

binding price floor.

(Table) Based on the table

both Canada and Mexico face constant opportunity costs.

A market demand curve

can be estimated with statistical techniques.

Society has more influence over the amount and characteristics of _____ than it has over any other resource.

capital

Which scenario shifts the production possibilities frontier outward?

capital accumulation

If a nation selects a product mix focused on _____ goods, the production possibilities frontier will expand at a greater rate than if the nation produced mostly _____ goods.

capital; consumption

Setting government policy to achieve economic goals is challenging because policies that tend to reduce unemployment are likely to

cause upward pressure on inflation.

(Figure: Interpreting Supply Shifts) The shift of the supply curve from A to B is an example of a

change in supply.

In a market-based economy, producers will tend to prefer less competition because it

enables higher prices.

Economists tend to look

for rational responses to incentives.

The increased participation of women in the workforce

has contributed to the rate of economic growth.

If a producer has a comparative advantage, then she has selected the activity that has the lowest opportunity cost. does not require specialization. is outside of the production possibilities frontier. has the lowest resource cost.

has the lowest opportunity cost.

Which of these would NOT yield an external cost?

helping an elderly person cross the street

The private market for education can be considered a market failure because it leads to a price of education that society believes is too ____ and a quantity of education that is too ____.

high; low

People's willingness-to-pay for umbrellas is MOST likely _____ on a _____ day.

higher; rainy

(Figure: Determining Production Possibilities 3) According to the graph, the output combination represented by the point can be achieved only

if more resources were acquired.

Supply and demand analysis is used

in both microeconomics and macroeconomics.

Which scenario will lead to increased economic growth?

increases in business investment

The study of economics

is about people making decisions regarding their use of scarce resources.

Which of these is the BEST example of a pure public good?

national defense

If a price ceiling is set above the equilibrium price

no impact is felt in the market.

If a price floor is set below the equilibrium price a surplus results in the market.

no impact is felt in the market.

In the following graph, if a price ceiling is set at $8, which situation would result?

no shortage or surplus

When a country is operating at its full potential output, it is producing at a point

on the production possibility frontier.

Points that are unattainable for an economy are shown as points of unemployment.

outside the production possibilities frontier.

Which type of payment would NOT be considered a market transaction?

payment made to a victim of a natural disaster

Economics is BEST defined as the study of how

people make rational decisions.

Since 2013, Venezuela has been experiencing shortages of food, new cars, secondhand cars, and other consumer goods. These shortages are partly the result of _____ on these goods.

price ceilings

If the price of a good falls below the equilibrium price

producer surplus is decreased and deadweight loss is increased.

(Figure: Determining Surplus) In the graph, the triangle ijk represents

producer surplus.

Many communities require that an inspector evaluate a house before it can be sold. This requirement

reduces the problem of asymmetric information.

When an economy is operating efficiently, the production of one more unit of a good will result in some loss of production of another good because

resources are limited, and efficiency implies that all resources are already in use.

If both the supply of and the demand for a good decrease simultaneously, but the decrease in supply is greater than the decrease in demand, then the equilibrium price _____ and equilibrium output _____. may rise, fall, or stay the same; falls rises; falls may rise, fall, or stay the same; rises falls; falls

rises; falls

A common definition of "economics" is that it is the study of maximizing net personal disposable income.

the allocation of scarce resources to satisfy competing wants.

Planned economies rely heavily on _____ to make most economic decisions.

the government

At any price below the equilibrium price

the quantity demanded exceeds the quantity supplied in the market.

A country can use its given resources to produce capital goods or consumer goods. This implies that

there is a tradeoff between the current and the future standards of living.

If a price floor is set below the equilibrium price in a market

there is no impact on the market.

Scarcity is BEST defined as when

unlimited wants exceed limited resources.