ECON Quiz Review

An increase in the number of firms in a market will cause the quantity of a good supplied to increase. Answers: True False

False (the only factor that can change the quantity supplied is price)

Which of the following is held constant along the demand curve? Answers: price of the good quantity income both A and B

Income

The demand by all the consumers of a given good or service is the ________ for the good or service. Answers: law of demand quantity demanded scheduled demand market demand

market demand

Suppose that your tuition to attend college is $14,000 per year and you spend $5,000 per year on room and board. If you were working full time, you could earn $26,000 per year. What is your opportunity cost of attending college? Answers: $19,000 $31,000 $40,000 $45,000

$40,000

Suppose the value of the price elasticity of demand is - 3. What does this mean? Answers: A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. A $1 increase in price causes quantity demanded to fall by 3 units. A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent.

A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.

Suppose the value of the price elasticity of supply is 4. What does this mean? Answers: A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent. A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent. A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent. For every $1 increase in price, quantity supplied increases by 4 units.

A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent.

Why aren't imports of roses from South America and Africa high year-round instead of just around Valentine's Day? Answers: A) The spike in demand makes it profitable for producers with higher costs (like transportation) to enter the market. B) Flower production in the US is particularly low in February, so US-based supply is shifted leftward that month because of the climate. C) The government limits imported flowers except around Valentine's and Mothers' Day. A&B None of these

A&B

As early societies became more complex, economies started to rely: Answers: On markets and trade On custom. On centralized control of resources. On markets and trade. All of the above. None of the above

All of the above

The key advantage of market exchange compared to one-on-one (barter) trade is that Answers: Markets allow for greater specialization. Markets allow trading to occur to a larger extent. Markets are more efficient. All of the above.

All of the above

The income effect of an increase in the price of peaches is Answers: A. the change in the quantity of other fruit demanded that results from the impact of the price change on purchasing power, holding all other factors constant. B. the change in the quantity of peaches demanded that results from the effect of the change in price on consumer purchasing power, holding all other factors constant. C. the change in the quantity of peaches demanded that results from the price increase, making peaches more expensive than other fruit, holding constant the effect of the price change on consumer purchasing power. D. None of the above.

B. the change in the quantity of peaches demanded that results from the effect of the change in price on consumer purchasing power, holding all other factors constant.

The cost of producing cigarettes in the U.S. has increased and at the same time, more and more Americans are choosing to not smoke cigarettes. Which of the following best explains the effect of these events in the cigarette market? Answers: A. Both the supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price. B. The supply curve has shifted to the right and the demand curve has shifted to the left. As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price. C. Both the supply and demand curves have shifted to the left. As a result, there has been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price. D. The supply curve has shifted to the right and the demand curve has shifted to the left. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

C. Both the supply and demand curves have shifted to the left. As a result, there has been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price.

Using basic assumptions you can determine Answers: A. Why markets are efficient. B. When markets are efficient. C. When government intervention helps or hurts economic performance. D. All of the above. E. A and B above

D. All of the above

Which of the following statements is true of the scientific method? Answers: The larger the size of the data set, the greater the scope of inaccuracy in an analysis. Arguments based on a few anecdotes are mostly true. Empirical arguments are more credible when they are based on a large data set. When a researcher looks at a large data set, she is more likely to jump to the wrong conclusions.

Empirical arguments are more credible when they are based on a large data set.

An inferior good is a good for which the quantity demanded decreases as the price increases, holding everything else constant. Answers: True False

False

Central control of economies Answers: Emerged with governments. Regulated resources like land and water. Was first proposed by Greek philosopher Leonidas. Was absent when society consisted of just prehistoric clans. None of the above.

Regulated resources like land and water

If both demand and supply increase, what will be the effect on the equilibrium price and quantity? Answers: The price will rise but the quantity could either increase, decrease, or remain the same. The price will fall but the quantity will increase. The quantity will increase but the price could either rise, fall, or remain the same. Both the price and the quantity will increase.

The quantity will increase but the price could either rise, fall, or remain the same.

Which of the following statements is true? Answers: Total revenue will equal zero when the demand for a product is unit elastic. When a firm lowers its price its total revenue may either increase or decrease. Whenever a firm raises its price its total revenue will increase. Whenever a firm increases its quantity sold its revenue will increase.

When a firm lowers its price its total revenue may either increase or decrease.

Which of the following statements is CORRECT? Answers: When demand decreases, both the price and the quantity increase. When supply decreases, both the price and the quantity decrease. When supply increases, the quantity increases and the price falls. When demand increases, both the price and the quantity decrease.

When supply increases, the quantity increases and the price falls.

Which of the following is NOT an economic question: Answers: Do we have enough medical care in the economy? Which type of music should we produce more of? Should we make hybrids or SUVs? Why do we need more Blue Bell ice cream? None of the above.

Why do we need more Blue Bell ice cream?

Holding everything else constant, a decrease in the price of bicycles will result in Answers: a decrease in the quantity of bicycles demanded. an increase in the quantity of bicycles demanded. a decrease in the supply of bicycles. an increase in the demand for bicycles.

an increase in the quantity of bicycles demanded

Arlene quits her $125,000-a-year job to take care of her ailing parents. What is the opportunity cost of her decision? Answers: zero, since she will no longer be earning a salary It depends on the "going rate" for home-care providers. at least $125,000 the value she attributes to the satisfaction she receives from taking care of her parents

at least $125,000

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum. What is the opportunity cost of his decision? Answers: the value he attributes to the joy of working at a museum 0 since he will no longer be earning a salary depends on the "going rate" of museum employees at least $80,000

at least $80,000

When supply increases and at the same time demand decreases, we Answers: can predict that both equilibrium price and quantity will decrease. cannot predict the change in either the equilibrium quantity or equilibrium price. can predict that both equilibrium price and quantity will increase. cannot predict equilibrium quantity, but know that equilibrium price will decrease.

cannot predict equilibrium quantity, but know that equilibrium price will decrease.

The income elasticity of demand for education is 3.5. Thus, a 4% increase in income will Answers: decrease the quantity of education demanded by 3.5%. increase the quantity of education demanded by 4%. decrease the quantity of education demanded by 14%. increase the quantity of education demanded by 14%.

increase the quantity of education demanded by 14%.

The extra cost associated with undertaking an activity is called Answers: opportunity cost. foregone cost. marginal cost. net loss.

marginal cost

A decrease in the price of either one or the other good will cause a consumer's budget constraint to: Answers: pivot rightward (pivot out). shift rightward. pivot leftward (pivot in). shift leftward.

pivot rightward (pivot out)