Econ Midterm Chapter 1

According to the law of supply, what is the relationship between price and quantity supplied?

direct

Which of the following can be considered a competitive market?

international market for coffee beans

According to the law of demand, what is the relationship between price and quantity demanded?

inverse

A free-rider problem exists when:

people receive a benefit for which they do not need to pay.

In the graph, point Q1 is the market equilibrium of output of this product, and point Q2 is the social optimum. This figure indicates that there are __________ externalities created by this good. This good should be __________ to reach the social optimum level.

positive; subsidized

What type of good is often provided by the government because it is hard to get people to voluntarily contribute their fair share of the expense?

public goods

When both supply and demand shift to the right, equilibrium:

quantity always rises.

Price elasticity of demand measures the change in:

quantity demanded due to the change in price.

Suppose that burgers and fries are complements in consumption. If the price of fries increases, the

quantity demanded for burgers will increase.

Refer to the table below. If the price of this good is $2.00, there would be a ________ of ________ units.

shortage; 30

Which of the following is NOT a solution to correct for negative externalities?

subsidies

The need to study economics would cease to exist if:

there were enough resources to produce all the goods and services people would like to obtain.

What is the term for the voluntary exchange of goods and services between two or more parties?

trade

Both monopolies and competitive firms:

try to maximize profits.

Assume that a monopolist faces the demand schedule given in the following table and a constant marginal cost of $2 for each unit of output. To maximize profits, this monopolist would produce __________ units of output and charge a price of __________ per unit.

two units; $5

Refer to the following figure to answer the five questions that follow.

unattainable with current resources.

Consider a market with a positive externality. The market will tend to ________ the good because the market participants tend to ignore the ________ of their decision.

under-produce; external benefit

Public goods are __________ in the market.

underproduced

Rational decision-making under conditions of scarcity requires individuals to:

understand that trade-offs are necessary.

Refer to the following graph. The supply curve is __________ because it is driven by the law of supply.

upward sloping

On the following figure, where does a monopoly operate to maximize profits?

where MR = MC

Which of the following activities creates positive externalities?

A homeowner whose property is next to a city park enjoys the sounds of kids playing soccer.

A recent college graduate applying for engineering jobs is an example of:

A household supplying labor resources

As the owner of a hotel, you have decided to lower the price for all rooms in the month of October. What should you expect to happen?

As the price is lowered, the quantity demanded of rooms will increase.

Which of the following sets of firms is best described as an oligopoly?

GM, Ford, Chrysler, Honda, and Toyota

If Heather can sell paper at a lower opportunity cost than Eitan can, then ________ has a(n) ________ advantage in paper sales.

Heather; comparative

Based on the table below, which of the following statements is true?

Henry has a comparative advantage in producing ketchup bottles, while Andy has a comparative advantage in producing steel bars.

To maximize profits, firms expand output until

MR = MC

There are a number of goods that over time, for a variety of reasons, transition from being a normal good to an inferior good or from being an inferior good to a normal good. One such example of a good that experienced this transition is a cathode ray tube (CRT) television, also known as a tube television. In the 1980s, more income for a household usually resulted in more CRT TVs being purchased. Today, more CRT TVs are purchased by households that have experienced a reduction in income. Why does this happen?

The CRT TV becomes an inferior good because it now is perceived as being of a lower quality than a flat-screen TV.

When you chose a major, you likely thought about your skills. Let's say you do not enjoy dealing with numbers. How could you explain to your parents, using logic from economics, why you chose to major in English instead of mathematics?

The opportunity cost of learning mathematics is too high.

What must happen to the market price in order for a shortage to be eliminated?

The price must rise.

The equilibrium price of teddy bears is $5. A study comes out that says owning a teddy bear causes one to earn a lower salary. If all other factors are held constant, which of the following scenarios could happen?

The price of teddy bears decreases to $4 because of a demand shift.

Which of the following will cause a movement along a good's supply curve?

The price of the good increases.

You are an entrepreneur and had a great idea to sell shoes that have springs installed in them to make walking easier. However, the development costs were so high that the shoes are priced 15 times higher than shoes without springs. As a result, many of the shoes have gone unsold. What would be a possible event that could eliminate or reduce the disequilibrium in the market for shoes?

There is an increase in income, and "spring shoes" are a normal good.

One way to promote a new business is to offer free items. If you were to open a new restaurant and offer free food, you likely would have a line out the door. How would an economist understand the behavior of those standing in line?

Those waiting in line place a low value on the use of their time.

Titleist has as its an advertising slogan, "The #1 ball in golf." Consumers can also buy generic golf balls. The manufacturers of generic golf balls do not engage in any advertising. Assume that the average total cost of producing Titleist and generic golf balls is the same.Which producer has a stronger incentive to maintain quality control in the production of golf balls?

Titleist

Austin, Jensen, Matthew, and Walker can all produce matches, brushes, cans, and shirts. The table below identifies how many of each good they can make in a day if they devote themselves to producing only that good.

Walker

Which of the following is NOT a monopolistic competitor?

a local corn farmer

Your neighbor likes to mow his grass each Saturday at 7 A.M. and the noise invariably wakes you up. This is an example of:

a negative externality.

After a recent study showed significant benefits to the use of public transportation, government officials have hired your consulting firm to increase its use. In the initial meeting between the government officials and your consulting firm, some ideas for increasing demand were discussed. Here are three of those suggestions.Suggestion 1. Reduce the price of public transportation.Suggestion 2. Increase the price of private transportation by increasing tolls.Suggestion 3. Offer monthly and yearly passes that reduce the price paid per ride.Based on your knowledge of the law of demand, which suggestion(s) would you recommend?

2

Which activity is most likely to create a positive externality?

A person receives a flu shot.

You are thinking about traveling to visit friends in Atlanta. You can fly or take the bus. A round-trip plane ticket costs $300, and it takes three hours to get from your house to your friend's house if you fly. A round-trip bus ticket costs $150 and it takes 10 hours to get door-to-door using the bus.What is the minimum value of your time necessary to induce you to buy the plane ticket instead of taking the bus?

$10.71/hour

Google has started a project to scan all books and make those that are not copyrighted available to people free of charge. Why is it important that only books without a copyright are available?

If all books were scanned and available free of charge, copyright holders would face a negative incentive to continue writing and publishing books.

Which of the following statements is normative?

Microeconomics is a great class.

Which of the following is a positive statement?

On average, people save 15% when they switch to GEICO.

Flour is a factor of production of cupcakes. How will an increase in the price of flour affect the market for cupcakes?

Overall supply will decrease.

At what price is the firm experiencing an economics loss?

P1

In the following graph, what price will a monopolist charge?

P2

Use the graph to answer the following question.At what price is the firm breaking even?

P4

At what price is the firm making an economic profit?

P6

Based on the following graph, what quantity will a monopolist produce?

Q2

Refer to the following image. When a market is in equilibrium, which of the following is true?

Quantity supplied is equal to quantity demanded.

In the market for breakfast cereal, the market is currently in equilibrium. Suddenly there is a storm that destroys the wheat that farmers had been growing for the cereal manufacturer. What will happen to the cereal market after the storm?

Supply will decrease.

Smoke detectors have been shown to effectively reduce the rate of death due to fires. In order to ensure that as many individuals as possible install a smoke detector, the government recently decided to subsidize the production of smoke detectors. Which of the following will be the consequence of this subsidy?

The supply curve shifts to the right.

You are an owner of a restaurant. In an attempt to increase sales, you have lowered prices by 10%. Which of the following is NOT a consequence of this price change?

The supply of restaurant meals will increase.

Which of the following is a positive statement?

The unemployment rate is 8%.

Which of the following changes in the coffee market would shift the supply curve to the right?

The wage for employees in the coffee business decreases.

Which of the following statements is normative?

There should be unemployment benefits for farmers who lose their farms.

Where would you plot unemployment on a production possibilities frontier?

a point inside the PPF

Where would you plot full employment on a production possibilities frontier?

a point on the PPF

Some public transit systems use an "honor system" whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer. With what population would such a system be successful?

a population that is unwilling to take risks and believes there is a high chance that they will be caught if they do not pay their fare

In the area of many college campuses, parking spaces are often scarce. If these parking spaces have parking meters, which population described below would pay for parking?

a population that is unwilling to take risks, believes there is a high chance that they will be caught if they do not pay their share, and places a high value on doing the "right" thing

Refer to the following figure. At a price of $5, this market is experiencing

a shortage.

Oligopoly occurs in markets with

a small number of large firms.

Jim and Lisa own a dog-grooming business in Champlain, New York, called JL Groomers. There are many buyers and many sellers in the dog-grooming service market. JL Groomers experiences normal cost curves, with the marginal cost (MC) curve minimized at $14 and crosses average total cost (ATC) curve at $22. JL Groomers will make positive economic profits if the market price is:

above $22.

At the profit-maximizing output in a monopoly controlled market, the price a monopolist charges is:

above marginal cost.

When the price is ________ the equilibrium price, we would expect there to be a ________, causing the market to put ________ pressure on the price until it went back to the equilibrium price.

above; surplus; downward

The ability of one producer to create more of a good than another producer using the same quantity of resources is called:

absolute advantage.

Suppose that a politician tells you about a plan to create two expensive but necessary programs to build more production facilities for solar power and wind power. At the same time, the politician is unwilling to cut any other programs. Assuming the resources are already being efficiently used in other programs, where would the point the politician is trying to reach be on the production possibilities frontier?

an impossible point

Which of the following will cause a rightward shift in the supply curve for tobacco?

an improvement in the technology used in the production of tobacco

In the market for desk lamps, which of the following will increase demand?

an increase in income if the good is a normal good

Economists use the scientific method and the tools of economics to study:

anything around them; the world is the economist's laboratory.

The scientific method and the tools of economics are useful in examining:

anything; economists will use their tools to study anything in the world around them.

Consider the production possibilities frontier (PPF) shown in the figure below to answer the three questions that follow.

area I: points inside the PPF and points on the PPF.

Demand for a good is elastic if the quantity demanded __________ in response to a price change.

changes significantly

Microeconomics is the branch of economics that focuses on the:

choices and decision-making of individuals and firms.

A physician who hires a plumber is an example of

comparative advantage.

Some studies have shown that eating chocolate before a test can increase brain activity, thereby causing students to score higher on exams. When these findings were announced, the price and quantity sold of chocolate increased in college towns. One reason for this could have been that the:

consumers increased their demand for chocolate.

Which of the following types of firms most closely fits the description of a competitive firm?

corn farmers

When a town has a single cable provider:

customers must buy some cable channels that they do not want in order to get the channels that they do want.

When supply shifts to the right and demand stays constant, the equilibrium price ________ and the equilibrium quantity ________.

decreases; increases

Comparative advantage emerges because of the presence of:

differing opportunity costs.

What region of the graph represent deadweight loss in the monopoly outcome?

e

For a perfectly competitive firm, marginal revenue is

equal to price.

Firms will break even if the price they charge is:

equal to their minimum average total cost (ATC).

Suppose pasta salad is a normal good. If the price of pasta (a major ingredient in pasta salad) increases and income also increases, the

equilibrium quantity of pasta salad may either increase or decrease and the equilibrium price of pasta salad will increase.

The costs or benefits of a market activity that affect a third party are called:

externalities

Compared to perfect competition, monopoly results in

fewer units produced and sold.

Judy spent eight hours studying for an exam. Normally, she would have spent that time watching TV instead of studying. She figures she could have made a "B" after only studying four hours, but she really wanted an "A." What is Judy's marginal cost in terms of TV viewing to improve her grade from a "B" to an "A"?

four hours

Which of the following describes Jonathan having a comparative advantage in producing apples?

giving up less production of other goods when producing an apple

You have to decide between going on a cruise with friends or going on a service trip with Alternative Spring Break, both of which cost the same amount. You could also work over the break and earn some extra money, but this would be less valuable to you than either experience. If you choose the cruise, what is your opportunity cost?

going on an Alternative Spring Break

A common solution to the free-rider problem is for

government to provide the good and then pay for its production through taxation.

In the case of negative externalities, social costs are __________ internal costs.

greater than

A firm characterized as a price-taker:

has no control over the price it pays, or receives, in the market.

A price-maker:

has some control over the price it charges.

Inefficient output and price, few choices, and rent seeking are all problems associated with:

monopolies.

Which of the following is NOT an example of a public good?

national parks

Actions and activities are discouraged with which type of incentive?

negative

This is a __________ externality which can be corrected to the optimal level with a __________.

negative, tax

Common resources are associated with the incentive to

neglect.

Driving in the city is an example of a good that is:

non-excludable and rival.

Copyright laws make the digital music you buy

nonrival and excludable.

Economists use the concept of ceteris paribus to examine a change in ____________ in a model, while assuming that all other variables remain constant.

one variable

Monopolies choose their profit-maximizing

output level and price.

Which of the following markets is oligopolistic?

passenger airlines

Which of the following goods is likely the most elastic?

photocopies that cost 50 cents per copy at one copy shop, when all of the shop's competitors charge 10 cents per copy

Refer to the following figure to answer the five questions that follow.Which point in the corresponding figure represents a combination of smoothies and milk shakes that society cannot currently produce?

point E

Which point on the graph below is unattainable because the economy does not have enough resources to produce it?

point G

Which point on the graph below represents an inefficient use of society's resources?

point H

When people elect to spend more years in school, this results in a ________ externality because there are ________ associated with this decision.

positive; external benefits

Monopoly power measures the ability to set the __________ for a good.

price

When supply shifts right and demand shifts left, the equilibrium:

price always falls.

Refer to the following graph. The demand curve slopes downward because

prices and quantity demanded move in opposite directions.

Externalities are minimized if:

private property rights are well established

The graph below illustrates the effect on the production possibilities frontier if the population grows, making more workers available. This new production possibilities frontier reflects the ability of society to

produce both more ketchup bottles and more steel bars

Under monopolistic competition, firms produce

products that are somewhat differentiated.

Markets fail to allocate resources efficiently when:

property rights are not well established.

An example of a direct, positive incentive is:

providing a commission for sales.

Product differentiation:

refers to firms' attempts to make real or apparent differences in essentially substitutable products look different in the minds of consumers.

The tragedy of the commons occurs because the good being produced is:

rival and non-excludable.

Which of the following is NOT an example of a private good?

satellite television

In a perfectly competitive market, the price of the product is

set by market supply and demand.

Economic growth is represented on a production possibilities frontier (PPF) by the PPF:

shifting outward.

When firms exit a market, the ________, causing individual firms' profits to ________.

short-run market supply curve shifts left; increase

Refer to the following figure. At a price of $15, this market is experiencing a(n)

surplus.

Which of the following is a monopoly?

the Tennessee Valley Authority, a large electricity producer that serves areas of five states

The opportunity cost of a purchase is:

the alternative good or service that one sacrifices because a different good was purchased.

The law of supply states that, all other things being equal:

the quantity supplied falls when the price falls, and the quantity supplied rises when the price rises.

As a discipline, economics is best described by which of the following?

the study of how to use scarce resources to satisfy unlimited wants and needs

The difference between the study of microeconomics and the study of macroeconomics is a difference between

the study of individual economic units and the study of aspects of the economy as a whole.

The production possibilities frontier (PPF) shows:

the trade-off between the efficient production of two different goods.

Oil is a main component in the manufacture of plastic bags. If the price of oil were to increase, the price of plastics bags would ________ and the quantity would ________.

increase; decrease

Something is an inferior good if the demand for the good:

increases as the consumer's income decreases.

The table provided below shows how to calculate a monopoly's total revenue and marginal revenue. As price falls, total revenue initially __________ and then __________.

increases; decreases

Because of scarcity:

individuals and societies must choose which wants and needs to satisfy.

The costs of a market activity paid for by an individual engaged in the market activity are ________ costs.

internal

The personal decisions of consumers and firms are based on ________ costs.

internal

Positive externalities exist because ________ benefits are ________ benefits.

internal; less than social

A government decision to impose a tax on the sale of plastic disposable water bottles is an example of:

internalizing the externality.

Sarah's Ice Cream distinguishes itself from other firms through great service by attractive servers. Sarah's Ice Cream faces competition from firms that produce similar but not identical products. Based on this information, Sarah's Ice Cream:

is probably in a monopolistically competitive industry.

Raising capital to compete against an entrenched monopolist:

is very difficult.

A carbon tax would be an efficient method of addressing the problem of global warming because:

it forces firms to internalize the external cost of emissions.

A monopolist is __________ likely to advertise than a monopolistically competitive firm.

less

Customers who visit convenience stores at 3 a.m. have a price elasticity of demand that is _____________ elastic than those who visit at 3 p.m.

less

Where there are established, well-defined private property rights, externalities will be

less prevalent.

Which of the following is NOT considered a natural barrier?

licensing

Scarcity refers to the __________ nature of society's resources.

limited

The concept of scarcity in economics refers to

limited resources and unlimited wants.

Economics is the study of how people allocate their __________ resources to satisfy their nearly __________ wants.

limited; unlimited

The government controls for many indirect incentives in safety net social programs by:

limiting payment to a specified time period.

A good example of a monopolistically competitive market is

local restaurants.

A natural monopoly exists when a single seller experiences __________ average total costs than any potential competitor.

lower

Think about a country where most economic production comes from factories that create air pollution. What could be a possible trade-off from lower levels of pollution?

lower incomes

Cellphone companies found that when they raised the price of connecting to wireless hot spots, demand decreased more than proportionally among casual users but decreased less than proportionally among businesspeople. This is because wireless connectivity is a(n) ________ good for casual users but a(n) ________ good for businesspeople.

luxury; necessity

Under monopolistic competition, a market has

many firms

The concept of __________ refers to weighing the costs and benefits of an action.

marginal thinking

The opportunity cost of attending college is likely to be highest for a high school graduate

who is capable of playing a well-paid professional sport.

Which of the following is a firm in a perfectly competitive market?

a local corn farmer

If the price is $3, the firm is making:

a loss and will exit the market.

A problem raising capital is an example of:

a natural barrier.

What is Pam's opportunity cost of making a stromboli?

1.5 pizzas

What is the optimal number of boats that should operate?

3

What is Angelo's opportunity cost of a painting? michael 10 5 angelo 6 2

3 sculptures

Assume that a monopolist faces the demand schedule given in the table below and a constant marginal cost of $50 for each unit of output. To maximize profits, the monopolist would produce __________ units of output at a price of __________ per unit.

3,000; $70

Assume that Andy and Henry, without trading with each other, will produce and consume the following number of steel bars and ketchup bottles.Now, assume that both Andy and Henry decide to specialize, and then Andy trades 25 steel bars to Henry for 75 ketchup bottles. This outcome is shown in the table below. Compared to the result without trade, what are the gains from trade that Andy experiences when he and Henry specialize and trade?

35 steel bars and 15 ketchup bottles

Based on the figure below, what would be the opportunity cost in terms of ketchup bottles when producing 20 more steel bars if the economy is efficiently producing 250 ketchup bottles and 50 steel bars?

50 ketchup bottles

Given an eight-hour workday, which statement best describes the absolute advantage evident in the table?

Alicia Keys has an absolute advantage in the production of both foods.

Given an eight-hour workday, to experience gains from trade: j-z 40 120 Alicia Keys 50 125

Alicia should make pizzas and Jay-Z should make cheesesteaks.

An example of the tragedy of the commons would be the

All of the answers are examples of the tragedy of commons.

What is the role of government, according to Adam Smith?

All of the options are roles of the government.

The table below shows the daily production potential of two workers if they devote all their time to making either steel bars or ketchup bottles. Who has the absolute advantage at producing steel bars?

Andy

The table below shows the daily production potential of two workers, if they devote all their time to making either steel bars or ketchup bottles. Who has the absolute advantage at producing ketchup bottles?

Andy

Which is an example of a double coincidence of wants?

Andy wants to exchange steel bars for ketchup and Henry wants to exchange ketchup for steel bars

Incentives can be classified as

Both of these are true

What would we have to assume before constructing a society's production possibilities frontier?

Both of these are true.

Monopolies lead to

Both rent seeking and deadweight loss are true.

When is demand more elastic?

Demand is more elastic when there is ample time to respond to a change in price.

If Elaine can produce more output from a set amount of resources than Jerry can, you know that ________ has a(n) ________ advantage.

Elaine; absolute

Assume that the price of rubber increased at the same time that Michael Jordan, arguably the best NBA basketball player of all time, became famous. What do you expect to happen to the equilibrium price and equilibrium quantity of the basketball shoes that are promoted by Michael Jordan?

Equilibrium price will go up and equilibrium quantity will be indeterminate.

The government allocates three allowances to each firm, where each allowance allows one unit to be emitted. The optimal outcome in this case is for ________ to sell one permit to the other firm, and a price that will be agreeable to both is ________.

Firm 1; $50

In the circular flow model of the economy:

Firms sell goods and services and buy resources

Companies use advertising to shift consumer demand. On which of the following demand shifters do you think advertisers most often rely?

Income decreases for an inferior good.

Which of the following statements is true about money?

It makes markets more efficient than barter

Suppose that in a time of crisis everyone pitches in and works more than full time. How is this represented by a production possibilities frontier?

The entire PPF shifts out.

What would you expect to happen to the price of bagels if the price of flour decreased and the price of cream cheese decreased?

The equilibrium price of bagels will be indeterminate and the equilibrium quantity will go up.

You are a producer of calculators. In the market for calculators, two events happened simultaneously last month. There was a fire at your calculator factory that eliminated half of your firm's production capability, and at the same time, your compensation costs increased by 5% because of an annual pay raise you give your employees. With these events happening simultaneously, which of the following is a consequence?

The fire causes the supply curve to shift a large amount and the increase in wages causes the supply curve to shift to the left by a smaller amount.

Which of the following conditions must be met for a single seller to become a monopolist?

The firm must have something unique to sell and a way to prevent potential competitors from entering the market.

The two flows in the circular flow model refer to:

The flow of goods, services, and resources; the flow of money

When most economists wake up in the morning, their first decision is whether to hit the snooze bar on the alarm clock. What statement best represents their thought process as rational decision-makers?

The marginal benefit of sleeping 10 more minutes is greater than the marginal benefit of 10 more minutes of work.

Based on the following graph, how does the monopolist's decision compare to the efficient price and output?

The monopolist charges more and produces less.

Which of the following is an example of normative analysis?

The multimillion dollar B-1 bombers are a waste of tax money.

Which of the following statements refers to a macroeconomic issue?

The national unemployment rate is currently 7.7%.

Which of the following is a microeconomic question?

What are the variables that determine the price of a specific good?

Which of the following is a normative statement?

You should wear a helmet when cycling.

Which of the following is a private good?

a bacon double cheeseburger

A monopolistically competitive market consists of many sellers, an oligopoly consists of ________ seller(s), and a monopoly consists of ________ seller(s).

a few; one

Compared to perfect competition, monopolies charge

a higher price.

Which of the following goods is likely the most inelastic?

a life-saving medication

Beer prices at major league baseball stadiums are usually much higher than prices at a bar or restaurant. This is mainly because:

baseball team owners have market power and can charge a higher price when they are the only sellers of the beer.

If a new french fry-cutting machine works twice as fast as the old machine, McDonald's would:

be willing to produce and sell more french fries at every price.

Suppose that Coca Cola and Pepsi are substitutes in consumption. If the price of Coca Cola decreases, then

both the equilibrium price and the quantity of Pepsi demanded will decrease.

Over time, a monopolist

can continue to make economic profits if it can maintain a monopoly and keep competitors from entering the market.

Suppose that at the current level of production, the price of a monopolist's product is equal to $15 per unit. Marginal revenue is equal to $10 per unit, and marginal cost is equal to $15 per unit. This monopoly

can increase its profit by producing and selling fewer units of its product.

What type of good is a public park?

cannot tell from information provided

According to the supply and demand model, when the cotton gin was invented and if all else was held constant, we would expect the equilibrium price of cotton to ________ and the equilibrium quantity of cotton to ________.

decrease; increase

Jewell attends a wedding reception where dinner is served. For her entrée, she has the option of steak, chicken, or pasta. If she chooses the pasta, then her opportunity cost is

either the chicken or the steak, whichever would have been her second choice to the pasta.

If a 20% increase in price causes a 30% drop in quantity demanded, this good is

elastic

The following graph portrays a market for a good whose consumption causes a positive externality. The curve marked Dinternal shows the market demand when consumers pay attention to only their internal benefits; the curve marked Dsocial shows demand when consumers observe social benefits as well. The socially optimal price is __________ than the market equilibrium price, and the socially optimal output level is __________ than the market equilibrium output level.

higher; higher

The following graph portrays a market for a good whose production causes a negative externality. The curve marked Sinternal shows the market supply when producers pay only their internal costs; the curve marked Ssocial shows the market supply when producers also pay the social costs. The socially optimal price is __________ than the market equilibrium price, and the socially optimal output level is __________ than the market equilibrium output level.

higher; lower

Opportunity cost is the ________ alternative forfeited when a choice is made.

highest-valued

Opportunity cost is the __________ alternative that must be sacrificed in order to get something else.

highest-valued

If the government wanted to give people a negative, direct incentive not to save money, what would be the appropriate policy?

imposing a tax on individuals for saving their money

You order a $20 Seattle Mariners sweatshirt online for a Father's Day gift. There's a standard shipping charge of $10, but you see that orders of $25 or more ship for free. You could also order a $5 Mariners sticker, but you're not sure your father would like it. You decide to order the sticker anyway. This is an example of

incentives

The price of a competitive firm's product is $50 per unit. The firm currently has marginal cost equal to $40. To maximize profits, this firm

should increase its output.

Which of the following is NOT characteristic of a market economy?

significant government intervention

Externalities are

sometimes negative and sometimes positive.

For which of the following goods would you expect demand to be the most responsive to a rise in price?

spaghetti

What enhances comparative advantage?

specialization

Suppose that Alicia Keys and Jay-Z could each make either New York-style pizza or Philly cheesesteaks. Given an eight-hour workday, which of the following would permit them to consume outside their respective production possibilities frontiers (PPFs)?

specialization and trade

For a market to work efficiently:

the external costs must be paid.

An internal cost is best defined as the cost of an activity paid for by:

the individual who is engaged in the activity.

The presence of many buyers and sellers is an important characteristic of competitive markets because it allows:

the price and quantity in the market to be determined by market forces.

A change in which of the following will cause a change in the quantity demanded of coffee?

the price of coffee

A change in which of the following will cause a change in the quantity supplied of coffee?

the price of coffee