ECON EXAM !
c. In the six months following the Japanese earthquake and tsunami in 2011, production of automobiles in Japan declined by 20 percent.
1
b. The success of Nike and Adidas athletic shoes leads more firms to begin producing athletic shoes.
3
a. To take advantage of high prices for snow shovels during a snowy winter, Alexander Shovels, Inc., decides to increase output
4
The equilibrium quantity of gasoline is _____ million gallons (enter a numeric response using a real number rounded to two decimal places) and the equilibrium price is _______ per gallon. If instead the market price were $______, then there would be a __________ of ____ million gallons.
5; 2.50; 1.75; shortage; 3
According to the law of supply,
A and C only
The diagram in panel a as an example of
A demand schedule
Productive efficiency means that
A good or service is produced at the lowest possible price
What do economists mean by market equilibrium?
A market outcome where quantity supplied is equal to quantity demanded.
Indicate which of the following could cause a movement from point A to C
A rise in the number of buys A decline in vegetarianism
To be successful as a luxury coffee bar, how does Starbucks need to distinguish Starbucks Reserve coffee shops from its standard Starbucks coffee shops?
All of the above are ways to distinguish Starbucks Reserve coffee shops from standard Starbucks coffee shops.
When does allocative efficiency occur?
Allocative efficiency occurs when production is in accordance with consumer preferences.
Which of the following illustrates the law of supply?
An increase in price causes an increase in the quantity supplied, and a decrease in price causes a decrease in the quantity supplied.
Which of the following events would cause the supply curve to decrease from S1 to S2?
An increase in the price of inputs
Why might studying economics be particularly good preparation for being the top manager of a corporation or a leader in government?
Economics teaches us how to look at the tradeoffs involved in every decision.
Scarcity is central to the study of economics because it implies that?
Every choice involves an opportunity cost
In a market system, what determines how goods and services will be produced?
Firms determine how goods and services will be produced
Which generation(s) do you expect Starbucks Reserve to attract: baby boomers (ages 53 and over), Generation X (ages 35 and over), or millennials (ages 17 and over)? Briefly explain.
Generation X, because their average incomes are likely to be higher.
Terbia is a closed economy, which has been growing at a very slow pace over the last decade. In order to boost economic growth, the government removed trade barriers earlier this year and increased its spending on the economy. These moves were expected to generate employment and increase economic growth. However, unemployment did not decline as much as expected. Which of the following, if true, can explain this outcome?
Imported varieties of many goods were cheaper than the domestically produced varieties.
Which of the following is a correct statement about a mixed economy?
In a mixed economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources.
b. As an economist, how can you hope that your analysis of the demand for butter is accurate if you neglect thousands and thousands of other variables?
In the model of demand and supply, we focus only on the variables that experience has shown are the most important in determining the demand for a product: income, price of substitutes and complements, taste for the good, population, and the expected future price.
The price of fries decreases due to a potato surplus. This will
Increase the demand for McDonald's Big Mac hamburgers
Which of the following statements about microeconomics and macroeconomics is correct?
Macroeconomics is the study of the economy as a whole.
Economics use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when
Marginal benefit equals marginal cost
A primary difference between macroeconomics and microeconomics is
Microeconomics examines individual markets while macroeconomics examines the economy as a whole.
Which of the following statements about microeconomics and macroeconomics is correct?
Microeconomics involves the study of how households and firms make choices.
What type of economic analysis is concerned with the way things ought to be?
Normative Analysis
Even though Sri Lankan tea was priced competitively, sales in Myanmar turned out to be far lower than expected. Which of the following, if true, could explain this outcome?
People in Myanmar are willing to pay more for their domestic tea brands than for foreign brands.
a. Are PopSockets and similar products substitutes for or complements to smartphones?
Phone grips and smartphones are complements because people who buy a smartphone may also buy a phone grip to help reduce the likelihood of dropping the phone.
When does productive efficiency occur?
Productive efficiency occurs when a good or service is produced at the lowest possible cost.
As a result of the change in the factor above,
The demand curve for RVs shifted to the right
Which of the following statements about the idea that people are rational is correct?
The idea assumes that consumers and firms use all available information as they act to achieve their goals.
c. Briefly explain whether the glut in this market is likely to eventually disappear.
The rental price of offices will eventually fall until the quantity of offices supplied equals the quantity of offices demanded, eliminating the glut.
Which of the following best describes scarcity?
Unlimited wants exceed the limited resources available
Which of the following best describes scarcity?
Unlimited wants exceed the limited resources available.
The three economic questions that every society must answer are
What goods will be produced, how will they be produced, and who will receive the goods?
According to the law of demand, there is an inverse relationship between price and quantity demanded. That is, the demand curve for goods and services slopes downward
When the price of a good increases, consumers' purchasing power falls, and they cannot buy as much of the good as they did prior to the price change.
The law of demand holds in the market for three goods, X, Y, and Z. An increase in the price of X causes an increase in the price of Y. A decrease in the price of X causes a decrease in the demand for Z. Which of the following conclusions is most strongly supported by the information given above?
Z is a substitute for input X in the production of Y.
Which of the following would not shift the demand curve for a good or service?
a change in the price of the good or service
The movement from point A to B on D1 is caused by
a decrease in the price of baskets of traditional wings.
Productive efficiency means that
a good or service is produced at the lowest possible cost.
McDonald's distributes $1.00 off coupons. This will cause
a movement along the demand curve for McDonald's Big Mac hamburgers.
A good for which demand increases as income rises is ________, and a good for which demand increases as income falls is ________.
a normal good; an inferior good
Show how an increase in the price of jiffy peanut butter affects the demand for Smucker's strawberry jam. When the price of a related good changes, this will result in ___________. In particular, when the price of Jiffy peanut butter increases, the demand curve for Smucker's strawberry jam will shift to the _________.
a shift in demand curve; left
If a surplus exists in a market, we know that the actual price is
above the equilibrium price, and the quantity supplied is greater than the quantity demanded.
What do economists mean when they use the Latin expression ceteris paribus?
all else equal
Government policymakers use economic principles to make decisions, such as
all of the above
Which of the following would cause a shift in the demand curve from point A to point B
all of the above
Economics is a social science because
all of the above.
When economists speak of a surplus, they mean a situation in which
all of the above.
If a shortage exists in a market, we know that the actual price is
below the equilibrium price, and the quantity demanded is greater than the quantity supplied.
Relative to a market economy, a centrally-planned economy would be expected to be
better at neither productive efficiency nor allocative efficiency because the absence of market-imposed competition negates the need of firms to satisfy consumer wants or produce using the lowest-cost methods.
Consider the market for Hewlett-Packard (HP) printers, depicted in the figure to the right, where the supply of HP printers has increased from S1 to S2 . What would cause the supply curve for HP printers to shift to the right?
both a and b
As a forecaster working for Allbirds, you should be concerned about point (a) and (b) because
both limit the size of the market. On the other hand, increased everyday comfort brought from the shoes may increase the demand for the shoe, causing an increase in sales.
Trade-offs force society to answer questions such as what goods and services will be produced, how will the goods and services be produced, and who will receive the goods and services produced. Which of the following countries has an economy where households and firms makes these decisions?
canada
Societies organize their economies in two main ways to answer the three questions of what, how, and who. A society can have a _________ economy in which the government decides how economic resources will be allocated. Or a society can have a _________ economy in which the decisions of households and firms interacting in markets allocate economic resources.
centrally planned; market
On the diagram to the right, a movement from A to C represents a
change in demand
On the diagram to the right, a movement from B to C represents
change in supply
Complete the following statement: "When there is a shortage of a good
consumers compete against one another by bidding the price upward.
The glut in the market will result in the ________ in the equilibrium price of office space in this market. This ______ rental price of office space will result in ________ opportunities for office tenants.
decline; lower; greater
This will result in the equilibrium price of soybeans _________ and the equilibrium quantity ___________
decreasing; increasing
The price of Burger King's Whopper hamburger declines. This will cause
demand for McDonald's Big Mac hamburgers to decrease
The U.S. economy enters a period of rapid growth in incomes. This will cause
demand for McDonald's Big Mac hamburgers to shift to the left if they are inferior goods
Suppose the demand curve shifts to the right. The new demand curve should be __________. Furthermore, the new demand curve should _________ the original demand curve. With this shift, equilibrium price will __________ and equilibrium quantity will __________
downward sloping; not intersect; increase; increase;
Suppose, in an effort to prevent the population from declining, Italy begins offering new mothers extended periods of paid family leave from work and, consequently, the birthrate per woman increases. If so, then this could best be characterized as an example of people responding to
economic incentives.
Scarcity is central to the study of economics because it implies that
every choice involves an opportunity cost.
Allocative efficiency means that
every good or service is produced up to the point where marginal benefit is equal to marginal cost
Allocative efficiency means that
every good or service is produced up to the point where marginal benefit is equal to marginal cost.
In a competitive market, firms can dictate what the equilibrium price of a good or a service will be.
false
Consider the supply of crude oil on the world market. In August 2011, the price of oil was roughly $80 per barrel. Which of the following changes would increase the supply of oil? The oil supply curve would shift to the right if
future oil prices were expected to be lower
Centrally planned economies allocate resources based on decisions by ____________ while market economies answer these questions through decisions made by ___________
government; households and firms
Microeconomics is the study of
how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.
Macroeconomics is most likely to include the study of
inflation
Goods X and Y are perfect substitutes. When the market price of good X is $5/unit, firm F produces 500 units of X. When the price of Y rises, 100 consumers of Y shift to the consumption of good X. This causes industry analysts to think that firm F will increase quantity supplied of X to match this increased demand. This conclusion is flawed because
it assumes that firm F is the only producer of good X.
The level of total investment by firms in new machinery and equipment helps to determine how rapidly the economy grows. This is a ___________ issue. However, to understand how much new machinery and equipment firms decide to purchase, one must analyze the incentives individual firms face, which is a ___________ issue.
macroeconomic; microeconomic
Which of the following areas of economics studies issues such as whether government intervention is capable of reducing the severity of recessions?
macroeconomics
Which of the following covers the study of topics such as inflation or unemployment?
macroeconomics
Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when
marginal benefit equals marginal cost.
Which of the following areas of economics studies issues such as ways to reduce teenage smoking?
microeconomics
Refer to the graph. A change in demand is illustrated by the move from ________, and a change in quantity demanded is illustrated by a movement from ________.
point C to point A; point A to point B
Canada has a market economy. As such, Canada's economy (relative to centrally planned economies) tends to result in
productive efficiency and allocative efficiency but not necessarily equity.
One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a really economist calls
scarcity
A decline in the demand for corn will
shift the soybean supply curve to the right.
The distinction between substitutes and complements is
substitute goods are used for the same purposes while complementary goods are used together.
Suppose instead that the price of LCD TVs is $2000.00. This will result in a _________ , which will place _________ pressure on the price.
surplus; downward
a. What does the article mean by a "glut"? What does a glut imply about the quantity of offices demanded relative to the quantity supplied? A glut is another term for a _________. When a market experiences a glut, the quantity supplied is ___________ the quantity demanded at the current price.
surplus; greater than
a. What approach to analyzing demand curves is Becker describing?
the ceteris paribus condition
Which one is best suited to find the quantity demanded at a price of $4.00?
the demand schedule
Macroeconomics is the study of
the economy as a whole, including topics such as inflation, unemployment, and economic growth.
Equity is
the fair distribution of economic benefits.
Goods X and Y are perfect substitutes. When the market price of good X is $5/unit, firm F produces 500 units of X. When the price of Y rises, 100 consumers of Y shift to the consumption of good X. This causes industry analysts to believe that firm F has increased quantity supplied of X by 100 units to meet the higher demand for it. To arrive at this conclusion, the industry analysts are assuming that
the new buyers of good X will, on average, consume one unit each.
The difference between a change in supply and a change in the quantity supplied is that the latter is
the product's own price while the former is caused by a variety of variables other than the product's price.
The law of demand is the assertion that
the quantity demanded of a product is inversely related to its price.
An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More specifically,
the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in consumers' purchasing power.
According to the law of demand,
there is an inverse relationship between price and quantity demanded.
Economists assume that people are rational in the sense that
they use all available information as they take actions intended to achieve their goals.
The distinction between a normal and an inferior good is
when income increases, demand for a normal good increases while demand for an inferior good falls.
A perfectly competitive market is a market that meets the conditions of
(1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.
"An increase in supply decreases the equilibrium price. The decrease in price increases demand. The statement is
false: decreases in price affect the quantity demanded, not demand.
Goods and services that can be used for the same purpose are ________, and goods and services that are used together are ________.
substitutes; complements