Econ Final Chapter 1

23. Which variable does NOT shift the demand curve? a. population b. price of complement goods c. income d. tastes and preferences e. None of the above; they all shift the demand curve.

e. None of the above; they all shift the demand curve.

38. The price elasticity of demand for an item is impacted by: a. whether or not the item is a necessity. b. the time available to adjust to price changes. c. the number of available substitutes. d. the share of one's budget (income) that is allocated to the product. e. all of these options.

e. all of these options.

11. If the economy heads into a recession and consumer income falls, which graph shows the effect of an economic slowdown on the market for holiday cruises? a. Graph A b. Graph B c. Graph C d. Graph D

graph a

27. The graph shows how supply and demand might shift in response to specific events. Suppose a fungus destroys one-quarter on the nation's tomatoes. Which panel BEST illustrates how this event will affect the market for ketchup?

graph c

19. The fidget spinner toy fad is over, and children are not buying them with the same enthusiasm as they did earlier. Which graph depicts the situation in the market for fidget spinners? a. Graph A b. Graph B c. Graph C d. Graph D

graph d

2. Many companies pay their factory employees based on piece rates—the more they produce, the more they get paid. This practice highlights the role of: a. marginal thinking. b. incentives. c. trade-offs. d. sunk costs.

b. incentives.

Scarcity: a. is when a resource is completely used up. b. is when there isn't enough to satisfy all our wants. c. happens only in a few economies around the world. d. can be fixed with good economic policy.

b. is when there isn't enough to satisfy all our wants.

45. Recently, more substitutes for milk have entered the market. We can expect that: a. the demand curve for milk has become less elastic. b. the demand curve for milk has become more elastic. c. the supply curve for milk has become less elastic. d.the supply curve for milk has become more elastic.

b. the demand curve for milk has become more elastic.

40. The demand curve for Hershey's Kisses, a particular brand of chocolate candy, will _____ the demand curve for chocolate candy as a general category. a. be more elastic than b. have the same elasticity as c. be more inelastic than d. have perfectly elastic demand when compared to e. There is not enough information to answer this question.

a. be more elastic than

16. Spaghetti and salad are related goods. Holding everything else constant, if the price of spaghetti decreases and the demand for salad increases, spaghetti and salad are probably: a. complements. b. substitutes. c. inferior. d. normal.

a. complements.

Consider the figure Gain in Producer Surplus from the Sale of Cappuccino Machines. Which areas represent producer surplus when the price is equal to P2? a. D, E, and F b. B and C c. D and E d. A, B, and C

a. D, E, and F

If price increases from $10 to $20, total revenue will: a. increase by $800, so the demand curve must be inelastic. b. increase by $100, so the demand curve must be inelastic. c. decrease by $800, so the demand curve must be elastic. d. decrease by $100, so the demand curve must be elastic.

a. increase by $800, so the demand curve must be inelastic.

32. In markets characterized by perfect competition, surpluses lead to: a. lower prices. b. higher prices. c. stable prices. d. unexploited gains from trade.

a. lower prices.

Assume that the market depicted above is characterized by perfect competition, what are the total gains from trade in equilibrium? a. $1,000 b. $500 c. $0 d. $1,500

a. $1,000

41. This summer gasoline prices in the United States increased by 50%, which brought about a fall in the quantity of gasoline purchased of 10%. The price elasticity of demand is equal to _____, and demand is described as _____. a. 0.2; inelastic b. 5; inelastic c. 0.2; elastic d. 5; elastic e. None of the above.

a. 0.2; inelastic

49. Gun buyback programs will be less effective if the: a. supply of guns is more elastic. b. supply of guns is more inelastic. c. demand for guns is more elastic. d. demand for guns is more inelastic.

a. supply of guns is more elastic.

29. There are 100 consumers, each of whom values a concert ticket at a unique whole number dollar amount between $1 and $100. One customer is willing to pay $1, a second is willing to pay $2, a third is willing to pay $3, and so on. An unlimited number of concert tickets are on sale for $20 each. What is the total consumer surplus in this market? a. $1,600.00 b. $3,200.00 c. $5,000.00 d. $6,400.00

b. $3,200.00

8. Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does the coffee shop receive when Kevin purchases the latte? a. $6 b. $4 c. $2 d. $1

d. $1

f the market price of coffee is $4, how much producer surplus do suppliers earn? a. $15 b. $45 c. $20 d. $22.50

d. $22.50

Which of the following scenarios does not illustrate the law of demand? a. When Kit-Kats are cheaper, Mary opts to buy more Kit-Kats. b. Darren buys two pairs of jeans when they are $40 each, but only one pair when it is $60. c. Layla buys less tea when the price of tea rises. d. Freya buys more doughnuts when the price of doughnuts is higher.

d. Freya buys more doughnuts when the price of doughnuts is higher.

15. Suppose the demand curve for monthly subscriptions to Netflix has shifted to the right. What could have caused this? a. a fall in the price of Netflix subscriptions b. an increase in the price of Netflix subscriptions c. an increase in the availability of Netflix subscriptions d. an increase in the incomes of consumers e. All of the above.

d. an increase in the incomes of consumers

24. If supply is upward sloping, a decrease in demand with no change in supply will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease

d. decrease; decrease

5. You are considering whether you should go out to dinner at a restaurant with your friend. The meal is expected to cost you $50, you typically leave a 20% tip, and a round-trip Uber ride will cost you $15. You value the restaurant meal at $30 and the time spent with your friend at $50. You should ____ to dinner with your friend because the benefit of doing so is _____ than the cost. a. go; greater b. go; less c. not go; greater d. not go; less

a. go; greater

If the figures represent the market for heated blankets, which figure shows the effect of an unseasonably warm winter? a. Figure A b. Figure B c. Figure C d. Figure D

d. Figure D

17. A supply curve (i) plots the quantities a seller is willing to sell at different prices. (ii) shows the total cost to the seller. (iii) shows rising marginal costs. (iv) shows rising fixed costs. a. only (i) b. (i) and (iii) c. (i), (ii), (iii), and (iv) d. (i), (ii), and (iii)

b. (i) and (iii)

50. Which of the following sellers will achieve their desired result for total revenue? a. A pharmacy raises the price of its store-brand pain medication to raise revenue from sales. The store-brand medication has many brand-name substitutes. b. A florist raises the price of roses before and on Valentine's Day and hopes to raise total revenue. The florist is the only flower shop in town. c. An airline maintains higher prices in the hopes of maintaining sales. However, a new low-cost competing airline has just entered the market. d. In a market with a relatively inelastic demand curve, a coffee shop lowers coffee prices in the hopes of raising total revenue.

b. A florist raises the price of roses before and on Valentine's Day and hopes to raise total revenue. The florist is the only flower shop in town.

6. Which principle tells you that the true cost of something is the next best alternative you have to give up to get it? a. The cost-benefit principle. b. The opportunity cost principle. c. The marginal principle. d. The interdependence principle.

b. The opportunity cost principle.

25. Coke and Pepsi are substitute soft drinks. Which of the following would cause the demand curve for Pepsi to shift to the left? a. A new Pepsi ad campaign increases the popularity of Pepsi. b. The price of Coke decreases. c. The price of Pepsi decreases. d. The cost of making Pepsi rises. e. All of the above.

b. The price of Coke decreases.

A product with a network effect is a. a drive-through window at a fast food restaurant. b. a social media tool such as WhatsApp. c. a broadband telecommunications network. d. the customer service line at the Department of Motor Vehicles. e. All of the above

b. a social media tool such as WhatsApp.

21. As the Federal Reserve Bank has changed their policy stance and have worked to increase short-term interest rates, longer term rates like mortgage rates have also increased. We would expect the higher mortgage rates to have what impact on the housing market. a. the higher mortgage rates will shift the supply of housing back, increase housing prices, and reduce the equilibrium quantity demanded. b. the higher mortgage rates will shift the demand for housing back, decrease housing prices, and reduce the equilibrium quantity supplied. c. the higher mortgage rates will shift the supply of housing out, decrease housing prices, and increase the equilibrium quantity demanded. d. the higher mortgage rates will shift the demand for housing out, increase housing prices, and increase the equilibrium quantity supplied. e. None of the above.

b. the higher mortgage rates will shift the demand for housing back, decrease housing prices, and reduce the equilibrium quantity supplied.

Suppose that wool becomes less expensive. Which panel BEST illustrates how this development will affect the market for winter socks, which are made from wool? a. A b. B c. C d. D

c

4. Nerida Kyle is thinking of buying a car to avoid taking Lyft to work. She is using the cost-benefit principle to evaluate this decision and is calculating the costs and benefits to owning the car over the next year. She's gathered the following information to help her make her decision: - The car costs $15,000 to purchase, but she can resell it after a year of use for $13,500. - She thinks gas will cost her about $1,200 for the year. - The annual insurance premium for her car is $800. - Maintenance and repairs will cost about $300 for the year. - Using Lyft to get to work would cost her $4,000 for the year. The cost of the car for the year is: a. $1,500. b. $4,000. c. $3,800. d. $7,800.

c. $3,800.

47. Prior to the pandemic, China produced about 10 million face masks per day which was roughly half of the world's face mask production. At the time, a box of 50 face masks sold for $10. By March of 2020, China was producing 130 million face masks. The price of a box of 50 masks increased to $60. Assuming that China's production was still producing half of the world's face masks, the elasticity of supply for face masks is a. 0.05 b. 0.75 c. 1.2 d. 2.0 e. 2.4

c. 1.2

42. Uber cuts the price of a ride in Greenville by 15%. Thereafter, the quantity of rides demanded rises by 45%. The absolute value of the price elasticity of demand for Uber rides is ______ and total revenues would _________ after the price cut. a. 0.33, increase b. 0.33, decrease c. 3, increase d. 3, decrease e. None of the above.

c. 3, increase

3. In the market for pharmaceuticals, the issue of "drug loss" illustrates which of the following ideas? a. The longer a drug is tested for safety, the lower is the opportunity cost in terms of lives lost. b. If a drug is not tested for safety, it might kill more people. c. Because of the higher cost of testing a drug, fewer drugs are made, and more lives are lost. d. Lives are being lost because safe drugs that are still in the testing stage have not been approved.

c. Because of the higher cost of testing a drug, fewer drugs are made, and more lives are lost.

In 2020, the government in China instituted a series of lockdowns that disrupted auto part production. As a result, auto parts that were sourced from China became more expensive or unavailable. Which graph shows the effect of this shortfall? a. Graph A b. Graph B c. Graph C d. Graph D

c. Graph C

18. A meat processing plant produces both steak and ground beef. What effect would rising market prices for steak have on the market for ground beef? a. There will be an increase in the quantity supplied of ground beef. b. The supply of ground beef will increase. c. The supply of ground beef will decrease. d. The supply of steak will decrease.

c. The supply of ground beef will decrease.

22. Weather forecasters predict that Hurricane Ian will strike Clemson this weekend. Which would occur today based on the expected storm? a. a decrease in people's willingness to pay for bread and milk. b. an increase in demand fort tickets to the North Carolina State vs Clemson football game. c. an increase in people's willingness to pay for rain jackets and ponchos. d. a shift to the left of the demand curve for gasoline in case there are refinery disruptions. e. All of the above.

c. an increase in people's willingness to pay for rain jackets and ponchos.

36. In a market characterized by perfect competition in which, at a price of $10, quantity supplied is 40 units and quantity demanded is 50 units. Equilibrium price in this market: a. is equal to $10. b. is less than $10. c. is greater than $10. d. differs from $10 in an indeterminate direction.

c. is greater than $10.

44. The demand curve is inelastic if the absolute value of the elasticity is: a. greater than 1. b. greater than 0. c. less than 1. d. equal to 1.

c. less than 1.

7. Asking "One more?" allows the _____ principle to be analyzed as a simple question. a. cost-benefit b. opportunity cost c. marginal d. interdependence

c. marginal

26. To economists, the term "consumer surplus" means: a. the excess money consumers have left over after purchasing goods. b. the difference between the price a consumer is willing to pay and the price that suppliers are willing to accept. c. the consumer's gain from trading. d. the difference between the price a consumer is able to pay and willing to pay.

c. the consumer's gain from trading.

Consider the figure Gain in Consumer Surplus from the Sale of Cappuccino Machines. Which areas represent consumer surplus when the price is equal to P2? a. D, E, and F b. B and C c. D and E d. A, B, and C

d. A, B, and C

10. Which of the following would be considered in a cost-benefit analysis to decide if a person should cycle to work or ride the subway? (i) The air pollution that the cyclist has to breathe. (ii) The cost of subway tickets. (iii) The time it takes to cycle to work versus the time it takes to ride the subway to work. (iv) The cost per gallon of gasoline. a. (i), (iii) and (iv) b. (i), (ii), (iii) and (iv) c. (i), (ii), and (iv) d. (i), (ii) and (iii)

d. (i), (ii) and (iii)

46. Butter producers know that the price elasticity of demand for butter is 0.2. If they want to increase sales by 4%, they will have to lower price by: a. 0.1%. b. 2%. c. 4%. d. 20%. e. None of the above.

d. 20%.

14. Which statement is CORRECT? a. A change in demand is a movement along the demand curve, and a change in quantity demanded is a shift of the demand curve. b. A change in quantity demanded and a change in demand are movements along the demand curve. c. A change in quantity demanded and a change in demand are shifts of the demand curve. d. A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift of the demand curve.

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

37. The COVID-19 pandemic caused many consumers to be quarantined in their homes. The supply and demand model would predict which of the following events in the market for home entertainment equipment for online retailers? a. The supply of home entertainment equipment sold by online retailers would decrease, resulting in a higher equilibrium price and a lower equilibrium quantity. b. The supply of home entertainment equipment sold by online retailers would increase, resulting in a lower equilibrium price and a higher equilibrium quantity. c. The demand for home entertainment equipment sold by online retailers would decrease, resulting in a lower equilibrium price and a lower equilibrium quantity. d. The demand for home entertainment equipment sold by online retailers would increase, resulting in a higher equilibrium price and a higher equilibrium quantity. e. There is not enough information to answer this question.

d. The demand for home entertainment equipment sold by online retailers would increase, resulting in a higher equilibrium price and a higher equilibrium quantity.

13. Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are a. are substitutes for fast-food restaurants b. capturing a change in tastes for in-home versus dining-out options c. inferior goods. d. normal goods. e. None of the above.

d. normal goods.

39. If a certain item has many substitutes, its demand curve will be: a. perfectly elastic. b. perfectly inelastic. c. relatively steep. d. relatively flat.

d. relatively flat.