ECON 1-5

Durable consumer goods have an expected life of_________ and non-durable consumer goods have an expected life of ._________

- 3 Years or longer -Less than 3 years

What is the slope of the budget line from trading with Kwame (coconuts for fish)?

-0.33

Suppose that you are on a desert island and possess exactly 20 coconuts. Your neighbor, Friday, is a fisherman, and he is willing to trade 2 fish for every 1 coconut that you are willing to give him. Another neighbor, Kwame, is also a fisherman, and he is willing to trade 3 fish for every 1 coconut. What is the slope of the budget line from trading with Friday (coconuts for fish)?

-0.5

What is the slope of the budget line?

-05+/- .1

Which point best represents the combination of present and future goods in the U.S.? Which dashed production possibilities curve best represents future growth in the U.S.?

-A - PPC2 -America will be operating on a point on its PPF farther along the horizontal axis to show its preference for current goods, whereas China will be operating at a point farther up to show its preference for future goods. Since the United States is consuming more today rather than saving, their production possibilities curve will shift out slower (less) over time because they are accumulating less capital. China's production possibilities curve will shift out faster (more) over time because they are accumulating more capital.

characteristics that lead to a downward-sloping demand curve

-An increase in purchasing power as market price decreases -Diminishing marginal utility

Which point best represents the combination of present and future goods in China? B Which dashed production possibilities curve best represents future growth in China?

-B -PPC3 -America will be operating on a point on its PPF farther along the horizontal axis to show its preference for current goods, whereas China will be operating at a point farther up to show its preference for future goods. Since the United States is consuming more today rather than saving, their production possibilities curve will shift out slower (less) over time because they are accumulating less capital. China's production possibilities curve will shift out faster (more) over time because they are accumulating more capital.

What is the opportunity cost of one more candy bar?

.05+/- .1 bag of peanuts

What is the opportunity cost of one more bag of peanuts?

2 candy bars

What is the (opportunity) cost of 6 more forklifts?

2.00 automobiles

The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a:

20 percent reduction in price.

Potatoes cost Janice $1 per pound, and she has $5.00 that she could possibly spend on potatoes or other items. If she feels that the first pound of potatoes is worth $1.50, the second pound is worth $1.14, the third pound is worth $1.05, and all subsequent pounds are worth $0.30, how many pounds of potatoes will she purchase? What if she only had $2 to spend? Janice will purchase__________ pound(s) of potatoes with her original income of $5.00. Janice will purchase__________pound(s) of potatoes when her income is $2.00.

3 IF 5.00$ 2 IF 2.00$

Pham can work as many or as few hours as she wants at the college bookstore for $9 per hour. But due to her hectic schedule, she has just 15 hours per week that she can spend working at either the bookstore or at other potential jobs. One potential job, at a café, will pay her $12 per hour for up to 6 hours per week. She has another job offer at a garage that will pay her $10 an hour for up to 5 hours per week. And she has a potential job at a daycare center that will pay her $8.50 per hour for as many hours as she can work. If her goal is to maximize the amount of money she can make each week, how many hours will she work at the bookstore?

4 HRS

If the economy is at point C, what is the (opportunity) cost of 2 more automobiles?

9.0 forklifts

Which statement is consistent with the law of demand?

A reduction in market price will lead to an increase in quantity demanded.

How do you derive a market demand curve from individual demand curves?

Add up quantities demanded by all individual consumers for each price

How do you derive a market supply curve from individual supply curves?

Add up quantities supplied by all individual producers for each price

consistent with the law of supply

An increase in market price will lead to an increase in quantity supplied.

Which is the most dominant in terms of total sales revenues?

Corporations

Indicate how each of the following might affect the data shown in the table and figure below: Ticket Price Attendance, Thousands Point $50 0 a 40 4 b 30 8 c 20 12 d 10 16 e 0 20 f An NBA team moves to the city where BTU plays.

Fewer tickets are bought at each price; the line shifts to the left.

Indicate how each of the following might affect the data shown in the table and figure below: Ticket Price Attendance, Thousands Point $50 0 a 40 4 b 30 8 c 20 12 d 10 16 e 0 20 f BTU contracts to have all of its home games televised.

Fewer tickets are bought at each price; the line shifts to the left.

Upon what specific assumptions is this production possibilities curve based? (FORKLIFTS/AUTOMOBILES)

Full employment, fixed supplies of resources, fixed technology, and two goods

Which type of goods is most adversely affected by recessions?

Goods for which the income elasticity coefficient is relatively high and positive.

Has the number of available combinations increased or decreased?

Increased

characteristics leading to an upward-sloping supply curve

Increasing opportunity costs Increasing marginal costs

If you are going to trade coconuts for fish, would you rather trade with Friday or Kwame?

Kwame

Indicate how each of the following might affect the data shown in the table and figure below: Ticket Price Attendance, Thousands Point $50 0 a 40 4 b 30 8 c 20 12 d 10 16 e 0 20 f BTU's athletic director hires away the coach from a perennial champion

More tickets are bought at each price; the line shifts to the right.

Indicate whether a change in the value of each of the following determinants of demand leads to a movement along the demand curve or a shift in the demand curve. Change in market price

Movement along the demand curve

Is production at a point outside the production possibilities curve currently possible?

No

Do these opportunity costs rise, fall, or remain constant as each additional unit of the product is purchased? Remain constant correct

Remain constant

Which characteristic of the production possibilities curve reflects the law of increasing opportunity costs: its shape or its length?

Shape

Indicate whether a change in the value of each of the following determinants of demand leads to a movement along the demand curve or a shift in the demand curve. Change in the price of a related good:

Shift in demand curve

Which business enterprise is the most prevalent in terms of numbers?

Sole proprietorship

determinants of demand?

Tastes and preferences technology factor prices

Which budget line features a larger set of attainable combinations of coconuts and fish?

The budget line from trading with Kwame

If the economy characterized by this production possibilities table and curve were producing 3 automobiles and 20 forklifts, what could you conclude about its use of available resources?

The economy is under-utilizing its available resources.

Which of the following generalizations is not correct? A. The larger an item is in one's budget, the greater the price elasticity of demand. B. The price elasticity of demand is greater for necessities than it is for luxuries. C. The larger the number of close substitutes available, the greater will be the price elasticity of demand for a particular product. D. The price elasticity of demand is greater the longer the time period under consideration.

The price elasticity of demand is greater for necessities than it is for luxuries.

Wages and salaries are __________ profits (corporate and non-corporate profits combined). Distinguish between a durable consumer good and a nondurable consumer good.

Three Times More

What are the major forms of household income?

Wages and salaries; corporate profits; proprietors' income; interest income; rents

Could a future advance in technology allow production beyond the current production possibilities curve?

Yes

Could international trade allow a country to consume beyond its current production possibilities curve?

Yes

If producers must obtain higher prices than before to produce a given level of output, then the following has occurred:

a decrease in supply.

In a command economy scarce goods are allocated by

a government-appointed planning board based on the board's long-term priorities.

Assume that the demand curve for product C is downsloping. If the price of C falls from $2.00 to $1.75:

a larger quantity of C will be demanded.

In a market economy a significant change in consumers' desire for product X will:

alter the profits or losses received by suppliers of product X. cause a reallocation of scarce resources. cause some industries to expand and others to contract.

Economic profits and losses:

are essential to the reallocation of resources from less desired to more desired goods

Self-interest helps achieve society's economic goals because

as consumers and producers exercise their freedom to act in their own self-interest, markets will produce the desired goods at the lowest possible cost.

In the circular flow model

businesses sell goods and buy labor; households buy goods and sell labor. resource markets provide for the exchange of labor and product markets provide for the exchange of goods and services.

The most efficient combination of resources in producing a given output is the combination that:

can be obtained for the smallest money outlay

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Smart car? The price of gasoline substantially drops

cannot be determined

. In general, the best way to decide which of the available combinations of candy bars and bags of peanuts to buy is by

comparing the marginal benefit of each alternative to the marginal cost of each alternative.

What is produced is ultimately determined by

consumers because if the goods offered are not what consumers want, consumers will not buy them.

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Smart car? Consumers anticipate that the price of small autos will greatly come down in the near future.

decrease

For a linear demand curve:

demand is elastic at high prices.

Indicate whether the following statements describe an inverse or direct economic relationship. The popularity of an entertainer and the price of her concert tickets:

direct

Indicate whether the following statements describe an inverse or direct economic relationship. The number of inches of rainfall per month and the sale of umbrellas:

direct

The market system:

effectively harnesses the incentives of workers and entrepreneurs.

Innovation lagged in the centrally planned economies because:

enterprises resisted innovation in fear that their production targets would be raised.

(Last Word) The safest way for an individual to leave a burning theater is to run for the nearest exit; it is therefore also the best means of escape for a large audience. This assertion illustrates the:

fallacy of limited decisions.

Barter requires that you

find a person who has what you want and a person who needs what you have to offer.

The law of increasing opportunity costs states that:

if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so.

The use of capital in the production process

improves efficiency, increases output, and provides for growth.

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Smart car? Income declines and small autos are an inferior good.

increase

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Smart car? Small automobiles become more fashionable.

increase

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Smart car? The price of large automobiles rises (with the price of small autos remaining the same)

increase

Tennis rackets and ballpoint pens are:

independent goods.

There is a wide variety of desired goods and services in a market system because

individual wants are diverse.

Indicate whether the following statements describe an inverse or direct economic relationship. The amount of tuition and the level of enrollment at a university:

inverse

The emergence of MP3 (or iPod) technology is an example of "creative destruction" because

it has replaced compact discs as a technology used for the storage and transfer of music.

The combined spending on both types of consumer goods is__________ than the total spending on services.

less

The phrase "invisible hand" means that

market prices provide information to consumers regarding products they wish to purchase and to producers regarding products they wish to produce.

In a market system scarce goods are allocated through the operation of

market prices that are determined by consumers and producers acting in their own self-interest.

Indicate whether a change in the value of each of the following determinants of demand leads to a movement along the demand curve or a shift in the demand curve. Change in factor prices

no change

Indicate whether a change in the value of each of the following determinants of demand leads to a movement along the demand curve or a shift in the demand curve. Change in technology

no change

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium:

price must rise, but equilibrium quantity may rise, fall, or remain unchanged.

In which of the following instances will total revenue decline? A. price rises and demand is inelastic B. price rises and supply is elastic C. price falls and demand is elastic D. price rises and demand is elastic

price rises and demand is elastic

The two basic markets shown by the simple circular flow model are:

product and resource.

The market system depends on private property ownership and the protection of private property rights to

provide an incentive to maintain property and allow for the orderly transfer of property ownership.

The use of money

provides a common value that makes buying and selling transactions simpler than would be the case with barter.

An increase in product price will cause:

quantity demanded to decrease.

If the supply and demand curves for a product both decrease, then equilibrium

quantity must decline, but equilibrium price may rise, fall, or remain unchanged.

In the circular flow model there is a flow of

real goods and services and a flow of money

(Consider This) The assertion by economists that "there is no free lunch":

remains true even for goods given away free by firms.

Specialization in production is important primarily because it:

results in greater total output.

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread, we would expect the price of wheat to:

rise, the supply of bread to decrease, and the demand for potatoes to increase.

In the 1990s thousands of "dot-com" companies emerged with great fanfare to take advantage of the Internet and new information technologies. A few, like eBay, and Amazon, generally thrived and prospered, but many others struggled and eventually failed. The market system answers the question "What goods and services will be produced?" The operation of the market can explain the varied outcomes of these "dot-com" companies because

shareholders experienced windfalls, creating profit expectations; new firms entered; prices fell; and some firms failed.

Indicate whether a change in the value of each of the following determinants of demand leads to a movement along the demand curve or a shift in the demand curve. Change in consumer expectations

shift in demand curve

Indicate whether a change in the value of each of the following determinants of demand leads to a movement along the demand curve or a shift in the demand curve. Change in income

shift in demand curve

If products C and D are close substitutes, an increase in the price of C will:

shift the demand curve of D to the right.

The three major legal forms of business enterprises are

sole proprietorship, partnership, and corporation.

"Division of labor" means that workers

specialize in tasks that take advantage of their individual abilities and skills.

The construction of a production possibilities curve assumes:

technology is fixed.

Some large hardware stores such as Home Depot boast of carrying as many as 20,000 different products in each store. This volume of goods is the result of

the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to maximize profits.

A fundamental difference between the command system and the market system is that, in command systems:

the division of output is decided by central planning rather than by individuals operating freely through markets.

Consider the statement: "We want money only to part with it." When people express a desire to "have money," they really want

the goods and services that money can buy

A production possibilities curve shows:

the maximum amounts of two goods that can be produced, assuming the full use of available resources.

Which of the following will not produce an outward shift of the production possibilities curve? A. an upgrading of the quality of a nation's human resources B. the reduction of unemployment C. an increase in the quantity of a society's labor force D. the improvement of a society's technological knowledge

the reduction of unemployment

Suppose that you had won $30 on your ticket, not $15. Is the slope of a new budget line flatter, steeper, or the same as in the diagram above?

the same

When an economy relies on specialization,

trade enables individuals to obtain the goods in which they do not have a specialization.

Consider the following statement: "The market system is a profit-and-loss system." This statement is

true because producer decisions are motivated by the attempt to earn profits.

Consider the following statement: "Competition is the disciplinarian of the market economy." This statement is

true because when producers face competition, they are driven to provide goods and services at the lowest possible cost.

Suppose you won $15 on a lotto ticket at the local 7-Eleven and decided to spend all the winnings on candy bars and bags of peanuts. The price of candy bars is $0.75 and the price of peanuts is $1.50. a. Complete the table below showing the alternative combinations of the two products that are available. Instructions: Enter only whole numbers. Consumption Alternatives Goods A B C D E F {C. B.} A0 B4 C8 D12 E16 F20

{B ofP} A10 B8 C6 2D4 2E 0E F0