econ 200 ch 1-4
The lowest price per unit that sellers would be willing to accept for 50 units is:
-$10.
In 1997, the health-care system in the United States accounted for about _______ percent of total output.
-13
If Farmer Sam MacDonald can produce 200 pounds of cabbages and 0 pounds of potatoes or 0 pounds of cabbages and 100 pounds of potatoes and faces a linear production possibilities curve for his farm, the opportunity cost of producing an additional pound of potatoes is _____ _ pound(s) of cabbage.
-2
If an economy is producing at alternative W, the opportunity cost to it of producing at X is _______ unit(s) of consumer goods per period.
-4
Suppose the economy is operating at point B. The opportunity cost of producing the third freight train would be:
-45 tons of sugar.
If the economy is producing at alternative X, the opportunity cost to it of producing at Y instead of X is _______ units of consumer goods per period.
-6
What percentage of total health-care spending is paid by private and government insurance?
-80
The gains or benefits from trade are:
-A result of more efficient resource utilization.
Which of the following statements is (are) true?
-All of the above are true.
Which of the following most correctly states the law of demand?
-As the price falls, all other things unchanged, the quantity demanded will increase.
A decrease in price will lead to an increase in demand.
-False
An increase in price will result in a decrease in the quantity supplied.
-False
If the United States has a lower opportunity cost than Mexico in the production of wheat, then it will import wheat from Mexico.
-False
Over the last few decades government has decreased its participation in health care.
-False
The Oregon Plan for the provision of health care to people living below the poverty line generally increased the number and type of procedures for which they were eligible.
-False
The law of demand implies that the quantity demanded of a commodity is inversely related to income, assuming other things that may affect demand remain the same.
-False
The questions of what goods to produce, how to produce them, and for whom to produce them are of concern only in advanced industrial economies.
-False
The same factors that lead to a change in quantity demanded also cause a change in demand.
-False
The three fundamental economic questions are what, how, and why.
-False
There is no role for government in a market capitalist economy.
-False
The theory underlying demand and supply curves assumes that, all other things unchanged, the primary variable that assures the equality of the quantities demanded and supplied is:
-price.
In the personal computer industry, the reason for the fall in prices and the increase in quantity after 1980 was:
-primarily due to technological change and an increase in the number of sellers.
If demand and supply both decrease:
-quantity will go down but the effect on price is indeterminate.
Demand is best defined as the:
-relationship between the price of a good and the quantity people are willing and able to purchase and the independent variables that determine quantity.
Supply is best defined as the:
-relationship between the quantity of a good or service sellers are willing to offer for sale and the independent variables that determine quantity.
If the price of chocolate-covered peanuts is 60 cents, the price will:
-remain unchanged.
In a competitive market, when price is below the equilibrium price, there will be pressure for the price to:
-rise.
According to the textbook, much of the discussion about the health-care "problem" in the United States has focused on:
-rising spending for health care.
A firm owned by one individual is called a:
-sole proprietorship.
If rent controls are set at Rent0:
-some renters would be willing to pay a price as high as Rent4 for Q0 units.
Differentiate between a change in demand and a change in quantity demanded.
a
Discuss and explain under what conditions government participation in the economy has a positive and productive role.
a
Discuss in some detail basic alternatives that have been proposed to curtail the rise in health-care costs.
a
Discuss the relative importance of demand and supply factors in health care and how they contribute to the increases in health-care costs.
a
Using a simple supply and demand model, discuss how insurance affects the health-care market.
a
What are the basic arguments for and against national health insurance? Discuss.
a
All choices have monetary costs.
-False
Ceteris paribus means allowing all things to change.
-False
Money is considered to be a factor of production.
-False
Scarcity is determined by the existence of bad alternatives.
-False
The existence of alternative uses for a resource implies it isn't scarce.
-False
The proposition that states that as output increases for one good in an economy that is on its production possibilities curve, the cost of additional units of the good on the horizontal axis will be greater and greater is the:
-Law of increasing opportunity cost.
The economy will experience its greatest growth by operating at point:
-Q.
According to the text, which of the following is true?
-Scientists can show that a hypothesis is false.
A free good is one that can be acquired without sacrifice.
-True
A good is scarce if we must sacrifice something to obtain it.
-True
A theory or model is a simplification of reality, in much the same way that a road map shows only those features needed to get from one point to another.
-True
Improvements in technology will shift the production possibilities curve outward.
-True
The economic way of thinking pays special attention to costs, assumes individuals seek to maximize some objective, and focuses on choices at the margin.
-True
The value of the next-best choice not chosen is called opportunity cost.
-True
One question that arises when determining for whom goods and services should be produced is:
-Who gets how much of the economic pie?
An example of capital is:
-a factory building.
Which of the following is an example of capital?
-a gravel truck
A proposition about the relationship between two variables that can be proven false is called:
-a hypothesis.
A theory that has won virtually universal acceptance is a:
-a law.
"Smokers are more likely to be murdered than nonsmokers." This statement is an example of :
-a positive economic statement.
By specializing in the production of particular goods in which it has a comparative advantage, a nation is:
-able to operate efficiently.
A feature that distinguishes economists' approach to making choices is (are):
-all of the above.
Improvements in technology provide benefits to:
-all of the above.
If the economy is represented by Curve 1, then:
-point E is unattainable at the present time.
One reason you go to college is to improve your employment opportunities and obtain a higher income in the future. In the context of production possibilities, this is most comparable to:
-producing relatively more capital goods and relatively fewer consumer goods.
A hypothesis is an assertion that can be:
-proven to be false.
Government's role of providing national defense is considered:
-providing certain goods and services.
When the government provides national defense, it is:
-providing goods and services.
Government's role of taxing some citizens and transferring income to others is considered:
-redistributing income.
As the economy moves from point A towards, say, point D, it will find that the opportunity cost of each additional submarine:
-rises.
A non-free good is one that is:
-scarce.
Increases in resources or improvements in technology will tend to cause a society's production possibilities curve to:
-shift outward to the right.
Technological improvements will:
-shift the production possibilities curve to outward.
Economics is a:
-social science concerned chiefly with how people choose among alternatives.
In drawing a production possibilities curve, it is assumed that:
-technology does not change.
Knowledge that can be applied to the production of goods and services is:
-technology.
There are several advantages that a market economy possesses. These do not include the fact that market economies:
-tend to prevent entrepreneurial activity that would result in large accumulations of wealth in the hands of a few people.
The best example of a market capitalist economy is:
-the United States.
If the economy is operating at point Y on currently relevant Curve 1, this means that:
-the economy is at full employment and is efficient.
Reaching the incorrect conclusion that one event causes another because the events tend to occur together is called:
-the fallacy of false cause.
In the 1980s, the federal government undertook a major build-up of the military sector, leading to reports that prices charged by military contractors were spiraling upward. According to production possibilities analysis, this result is not surprising due to:
-the law of increasing opportunity cost.
The Case in Point on the oil extraction suggests that one reason oil may become more costly is that :
-we will have to give up more and more valuable alternatives to extract oil.
An answer to the question "For whom" determines:
-who gets the goods and services produced.
Farm products are normal goods, which means that as:
-incomes go up, the demand curve shifts to the right.
In agriculture during the last several decades:
-prices of agricultural output have fallen.
Based on the exhibit and assuming that there are no third-party payers:
-the total amount spent on health services is OP1AQ1 at price P1.
A hypothesis that has been tested extensively without being rejected and has won widespread acceptance is a:
-theory.
If an economy is at point U, and its production possibilities curve is Curve 1, this would indicate that:
-there is inefficiency and/or unemployment.
The observed correlation between baldness and heart disease demonstrates that:
-there is probably some other factor that causes both baldness and heart disease.
Which of the following is a demand factor in the health-care market?
-treatment decisions of doctors.
Opportunity cost is the expected value of the alternative not chosen.
True
Describe what would happen in a market if the current price were above the equilibrium price (assume no government interference). Using the same assumptions, describe what would happen if the current price were below the equilibrium price. Use a graph to explain your answer
a
The problem of scarcity is confronted by:
- all societies.
An answer to the question "How are goods produced?" determines:
-how resources are combined in the production of goods.
The set of acquired skills and abilities that workers bring to the production of goods and services is:
-human capital.
The production possibilities curve represents the fact that:
-if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
A tradeoff between two economic goals means that:
-if you achieve more of one, you will achieve less of the other.
In the market for personal computers and in the stock market:
-all of the above are true.
There is equilibrium in the market when:
-all of the above are true.
Insurance companies have addressed the high costs of health care by:
-all of the above.
An increase in supply is caused by:
-an advancement in the technology for producing the good.
A price that the government guarantees farmers will receive for a particular crop is a(n):
-price support.
If the demand for housing increases and the supply of housing decreases:
-price will increase, but the quantity change is indeterminate.
If the price of chocolate-covered peanuts is 50 cents, there is:
-a shortage of 70 bags per month.
During the Great Depression:
-agriculture was hit particularly hard.
The market for health care is characterized by which of the following?
-all of the above
Which of the following statements is (are) true?
-In the last few decades health-care spending has grown dramatically. -Health-care costs have grown relative to an increasing total output. -Health-care costs account for more than two and a half times the share of total output that they did in 1960. ---All of the above are true.
The quantity Q2 is available at price:
-P3.
The exhibit shows how supply and demand might shift in response to specific events. Suppose a new machine is developed that 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)
The exhibit 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 tuxedoes, a normal good?
-Panel (a)
The exhibit shows how supply and demand might shift in response to specific events. Suppose a wet and sunny year increases the nation's corn crop by 20 percent. Which panel best describes how this will affect the market for corn?
-Panel (b)
The exhibit shows how supply and demand might shift in response to specific events. Suppose oil becomes more expensive. Which panel best describes how this will affect the market for gasoline, which is made from oil?
-Panel (b)
The exhibit 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)
The exhibit shows how supply and demand might shift in response to specific events. Suppose half 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 (c)
The exhibit shows how supply and demand might shift in response to specific events. Suppose the technology for producing automotive gasoline improves. Which panel best describes how this will affect the market for automotive gasoline?
-Panel (d)
If rent controls are imposed, they will most likely be set at either _______ or _______ .
-Rent0; Rent1
The price of oranges rises. What happens in the market for apples, which are a substitute for oranges?
-The equilibrium price and quantity rise.
A shortage results from a current price being below the equilibrium price.
-True
A surplus will cause pressure on the price to fall.
-True
By limiting the number and type of procedures it would cover, the Oregon Plan for health-care insurance for the poor was able to increase the number of people included in its coverage.
-True
Demand and supply are terms that refer to the behavior of people and firms as they interact in markets.
-True
If two goods are complements, a fall in the price of one will lead to an increase in demand for the other.
-True
Technological improvements in the health-care industry have been a primary factor in the increase in health-care costs.
-True
An increase in supply is caused by:
-a decrease in the price of a good using the same resources.
Economists classify health care as:
-a normal good.
If the government sets out to help low-income people by establishing a maximum amount for rent:
-a price ceiling has been set and a shortage of rental units may occur.
To help farmers:
-a price floor would be set at P4, causing a surplus of Q3 - Q0.
Demand is defined as:
-a schedule that shows how much will be purchased at various prices during a particular period, all other things unchanged.
Which of the following always results in an increase in price and quantity?
-an increase in demand with no change in supply
Assuming that pizza is a normal good, if students' income at your college increases substantially, there would be:
-an increase in the demand for pizza.
An increase in supply of a good is caused by:
-an increase in the number of sellers.
A decrease in the price of a good will, all other things unchanged, result in:
-an increase in the quantity demanded.
If the price of mozzarella cheese (an ingredient in pizzas) declines due to a major technological breakthrough in the dairy industry, there would be:
-an increase in the supply of pizza.
An increase in supply, with no change in demand, will lead to ______ _ in equilibrium quantity and ________ in equilibrium price.
-an increase; a decrease
Price controls:
-can result in inequitable outcomes.
For most consumers, videocassette recorders and videocassettes are likely to be:
-complementary goods.
A decrease in the demand for eggs caused by concerns over cholesterol is most likely attributable to which demand shifter?
-consumer preferences
D1 and S1 are original supply and demand curves, and S2 and D2 are new curves. In this market for a normal good, the shift in the demand curve may have been a result of:
-consumers' expecting the price to go up.
The bulk of the nation's output is produced by:
-corporations.
Between 1930 and 1933, the prices received by farmers tended to:
-decrease.
Consumer preferences, prices of related goods, income, and demographic characteristics are often termed:
-demand shifters.
The relationship between the price of a good and the quantity people are willing and able to purchase and the independent variables that determine quantity is:
-demand.
A market surplus occurs if the quantity:
-demanded is less than the quantity supplied.
The law of demand is illustrated by a demand curve that is:
-downward-sloping.
A market price support policy attempts to assist the farm industry by:
-establishing price floors in farm output markets.
An increase in buyers' income, assuming videotape rentals are a normal good, would result in a change in the videotape rental market illustrated by the move from:
-f to g in Figure (a).
An area of concern in the provision of health care in the United States is that:
-health-care costs and spending are too high.
A cost that farm subsidies and price floors imposes on the rest of the economy is:
-higher consumer commodity prices.
If both the demand for a product and the supply of it increase, then the equilibrium quantity will ________ and the equilibrium price will ________.
-increase; either increase, decrease, or remain constant
An increase in demand, all other things unchanged, will result in a(n) ________ in the equilibrium price and a(n) ________ in the equilibrium quantity.
-increase; increase
In the last 30 years, the costs of health care have _______ as a percentage of U.S. output.
-increased absolutely and
At a price of $60 with a third party payer, the total cost of health-care services compared to the price that would prevail if there were no third-party payers has:
-increased from $80 million to $180 million.
During the 1930s, the role of the federal government in the U.S. agricultural industry:
-increased substantially.
A market price floor for wheat:
-increases the price paid by consumers.
Third-party payer systems for health-care services include payments made by:
-insurance companies.
The equilibrium price is often considered to be "just right" because:
-it equates the amount supplied with the amount demanded. -it does not result in a shortage. -it does not result in a surplus. Correct! ----of all of the above.
A price ceiling will have no effect if:
-it is set above the equilibrium price.
The equilibrium price established by supply and demand could be called a "just right" price because:
-it is the only price where the quantity demanded and the quantity supplied are equal.
A decrease in buyers' income, assuming videotape rentals are a normal good, combined with a decrease in the wage rate paid to video rental store employees would result in a change illustrated by the move from:
-j to m in Figure (c).
A ceiling price set in the policy of rent controls:
-may result in some people who rent out units to leave the business because they cannot cover costs.
Health care is a(n):
-normal good.
In the Case in Point on "The Monks of St. Benedict's," the Monks got out of the egg business largely because:
-of the increase in the price of chicken feed.
Rent controls:
-often help high-income families.
A maximum price set below the equilibrium price is a:
-price ceiliing
Every day for the past two years you've had ham and cheese on a whole wheat bagel for lunch at Bungalow Bob's Bagel Boutique. However, the price of whole wheat bagels has risen by 10 cents so today you decide to have ham and cheese on a rye bagel. In this case, whole wheat and rye bagels are best considered:
-substitute goods.
A feature of the health-care market is:
-that demand has increased relative to supply.
A movement from point G to point U could be a representation of what happened during:
-the Great Depression.
Plastic and steel are substitutes in the production of automobiles. If steel prices go up, all other things unchanged:
-the equilibrium price of plastic will fall.
A decrease in the price of movie tickets (a substitute) would result in a change illustrated by:
-the move from f to g in Figure (a).
A decrease in the price of videotapes sold by movie producers to rental stores would result in a change in the videotape rental market illustrated by:
-the move from n to o in Figure (a).
The slope and location of the demand curve depend on:
-the number of buyers.
When the market price is established where demand and supply curves intersect:
-the quantity demanded and the quantity supplied are equal.
When new roofing contractors entered the southern California market after the El Niño storms of 1997:
-the supply increased.
Based on the exhibit, and assuming there are no third-party payers:
-the total amount spent on health services is $80 million per week.
According to the textbook, the dramatic global shift toward market capitalist economies in the 1980s and 1990s is in large part the result of:
-an emphasis on individual ownership and decision making power yielding freedom not available under socialist systems.
If an economy has to sacrifice increasing amounts of good X for each additional unit of good Y produced, then its production possibilities curve is:
-bowed out from the origin.
A factor of production that has been produced for use in the production of other goods and services is:
-capital.
A basic assumption used in many economic models is:
-ceteris paribus, which means all other things remain unchanged.
The use of controlled experiments using particular substances to test hypotheses is most likely to be found in:
-chemistry.
In economics, the function of theories, laws, and hypotheses is to:
-discover relationships between events that are important to economic behavior.
In enforcing the legal system, the government in a market capitalist economy acts to:
-do all of the above.
The movement from Curve 1 to Curve 2 indicates:
-economic growth.
Many disagreements among economists result because:
-economists sometimes make normative judgments.
Government's role of protecting property rights is considered:
-enforcing a legal system.
A person who seeks to earn profits by finding ways to organize factors of production is called a(n):
-entrepreneur.
The problem of determining what goods and services society should produce:
-exists because there are not enough resources to provide all the goods and services that people want to purchase.
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.
The incorrect presumption that because two events tend to occur together, one must cause the other is the:
-fallacy of false cause.
A scarce resource is one that:
-has alternative uses.
A scarce resource is one that:
-has two or more alternative uses.
To be considered capital, a factor of production must:
-have been produced.
An economic system is the set of rules that define _______ and _______ .
-how an economy's resources are to be owned; how decisions about the resources are to be made
Economics, generally speaking, is primarily concerned with:
-how people choose among the alternatives available to them.
The exhibit shows production possibilities curves for two countries that produce only radishes and bicycles. The axes of both graphs are measured in equivalent units. Country A is now operating at point M, and Country B is now operating at point N. Suppose Country A discovered a new technology that greatly increased its ability to produce bicycles. This would:
-increase the opportunity cost of producing radishes in Country A.
The fact that a society's production possibilities curve is bowed out from the origin of a graph demonstrates the law of:
-increasing opportunity cost.
A variable that induces a change in another variable is a(n):
-independent variable.
Microeconomics deals with:
-individual units in the economy.
Water is considered a scarce good rather than a free good because:
-it has alternative uses.
Human effort that can be applied in the production process is called:
-labor.
Unemployment and inflation are:
-major topics in macroeconomics.
The economic way of thinking has to do with:
-making choices at the margin.
Making choices that are expected to achieve the highest possible value for some objective is termed:
-maximizing.
A simplified representation of a particular problem is a:
-model.
Resources from nature that can be used to to produce other goods and services are called:
-natural resources.
Capital, labor, and natural resources combine to produce goods and services. Which of the following will not lead to an increase in the ability of an economy to produce goods and services?
-new government restrictions on which technologies may be used to produce goods and services
The current rate of unemployment of 5 percent is too high. This is a _______ statement.
-normative
The statement that the minimum wage needs to be increased is a:
-normative statement.
Economists are:
-not always in agreement on the best way to implement policy decisions.
In general, production possibilities curves are "bowed out" because:
-of the law of increasing opportunity cost.
Inefficient production or unemployment exists when the economy is ________ the production possibilities curve.
-operating inside
The sacrifice of an alternative is called:
-opportunity cost.
A key theme fundamental to all of economics is:
-people have unlimited wants facing limited means to satisfy them.
Discuss and explain the rationale underlying the law of increasing opportunity cost.
a
Explain how and why the concept of "all other things unchanged" is so important in the study of economics.
a
