Economics Final
On a demand and supply curve graph, consumer surplus is found (1)____ and (2)____. Producer surplus is found (3)____ and (4)____.
(1) under the demand curve; (2) above equilibrium price; (3) above the supply curve; (4) under equilibrium price
Assume a pizza costs $10. When the price increases to $12, demand falls 10%. What is the own-price elasticity of demand? Note: in economics, elasticity is generally reported as a positive number even when it is negative.
0.5
Which of the following will NOT result in a shift of the supply curve?
A change in the price of the good.
Which of the following statements about price floors is correct?
A price floor limits how low a price can be charged for a product or service.
Which of the following scenarios will necessarily result in a producer surplus?
A producer sells a computer for $600, but was willing to take $400 for it.
Which of the following is NOT a reason for market failure?
Abundance of public goods
Which of the following inputs is NOT considered variable in the short run?
All of these answers
Which of the following situations would contribute to economic profit earned in uncompetitive markets?
All of these answers
Which of these determines the location of the production possibilities frontier?
All of these answers
Which of these statements is true about supply and producer surplus?
All of these answers
What is the theory of utility based on?
An assumption
Which of the following is an example of an individual who is not involved in a transaction but is bearing some cost?
An individual exposed to secondhand smoke
Which of the following statements regarding the relationship between a good's price and the quantity demanded is true?
An individual's purchasing power helps define how much of a good she wants at a given price.
Which of the following is a negative consequence of price controls?
Artificially low prices cause demand to outstrip supply, leading to shortages
How do corrective taxes address negative externalities?
By increasing the private cost of producing a good or service generating the externality
Negative Cross Price Elasticity (Cross Elasticity) of Demand between two goods indicates that the two goods are ________.
Compliments
Fill in the blank. The gains from trade enables _______________ the production possibility frontier.
Consumption outside
If the price elasticity of demand for a product is 2.5 and its price has increased by 3%, we can conclude that the quantity demanded:
Decreased by 7.5%
Assume the price of a normal good falls. Which of the following is true?
Demand for the good will rise due to the income effect and the substitution effect
Factory A is able to produce 1,000 units of output at a cost of $10,000 and 2,000 units of output for $22,000. What is Factory A experiencing?
Diminishing returns to scale
Which of the following lists the three main properties of indifference curve?
Downward sloping, convex to the origin, and do not intersect
How do economic profit and accounting profit differ?
Economic profit includes implicit (opportunity) costs and accounting profit does not.
WHERE can economic theory be applied?
Economic theory and analysis may be applied throughout society, including business, finance, health care, and government.
Which of the following best explains the role of mathematics in accomplishing the goals of the study of economics?
Economics is a social science that assesses the relationship between the consumption and production of goods and services in an environment of finite resources.
Why is the study of economics relevant?
Economics is the scientific study of the way in which humans make choices about production, consumption and wealth when faced with scarce resources.
Which of the following are variable costs?
Employee wages and raw materials
If a worker chooses to work less when the wage rate rises, leisure is a(n) ___________.
Giffen good
Suppose you own a profitable tailoring company that hires two workers who can make ten shirts per day combined. You decide to double the amount of capital and labor and see that the total number of shirts produced each day has increased to 22. This implies that your company is exhibiting __________.
Increasing returns to scale
Which of the following are the two characteristics of a private good?
It is excludable and rival
How does the aggregate demand curve for a public good relate to individual demand curves?
It is the vertical sum of all individuals' demand curves.
In the short term, would you expect a non-durable good's price elasticity of demand to be higher or lower than it is in the long term?
Lower, because consumers are more likely to switch to other substitutes over the long term
For which type of good would you expect the price elasticity of demand to be highest?
Luxury goods
_____________ analyzes the entire economy and the issues affecting it.
Macroeconomics
Which of the following statements regarding the Principle of Diminishing Marginal Utility is NOT true?
Marginal utility must eventually decline to zero.
____________ examines the behavior individual consumers and firms within the market, including assessment of the role of preferences and constraints.
Microeconomics
Which of these individuals was NOT an influential founder of economics in the 19th Century?
Milton Friedman
Tom has $10. The cost of each pen is $2, while the cost of a pencil is $1. Tom will purchase the two goods to maximize utility. Tom buys 3 pens and 4 pencils. If the price of pens were to fall to $1 each, Tom would buy _______.
More pens
A _____ graph shows the maximum production level for one commodity for any production level of the other commodity.
PPF
"Because firms in this type of market structure have no market power, they are price-takers and cannot affect the market price for their goods." What market structure does this statement describe?
Perfect competition
What is the price-to-quantity relationship typically depicted in a supply curve?
Positive correlation between price and quantity supplied.
Why is perfectly inelastic supply is depicted as a vertical line?
Price can vary while quantity stays at the same level
The market rent of an apartment is $900. Imagine the city government passes a law that landlords cannot charge more than $800 for an apartment. What will happen?
Prices will decline, demand will rise, supply will fall, and there will be a shortage
Which type of good is excludable and rivalrous?
Private goods
If demand increases and supply remains constant, what happens to the market equilibrium?
Quantity and price both rise
If supply falls and demand remains constant, what happens to the market equilibrium?
Quantity and price both rise
Electricity is a good with few or no close substitutes. What would you expect about the price elasticity of demand for electricity?
Relatively inelastic
Which of the following is not a requirement of cost-benefit analysis?
Selecting the least expensive project.
A town provides public transportation in the form of 350 bicycles. The bicycles are placed around town and free for anyone to use. However, within four days all of the bicycles are stolen for private use. This is an example of:
The free-rider problem
Which of the following is an example of government regulation?
The legal prohibition of an act with negative externalities
Which of the following BEST summarizes how the market demand curve compares to the individual demand curve?
The market demand curve represents a summation of individual demand curves, where quantity is summed for every given price.
Which of these is NOT a factor that affects demand?
The market structure
Where is equilibrium located on a supply/demand chart?
The point where the demand line and the supply line intersect.
Under which conditions will a buyer most likely bear the full burden of a tax imposed on a product?
The price elasticity of demand of the product is 0
A payroll tax will fall more heavily upon the employee (producer) than the employer (consumer) if which of the following is true?
The supply of labor is more inelastic than the demand for labor
The consumer surplus that an individual derives from a product is different for different consumers for which of the following reasons?
The utility of an item is perceived differently by every consumer
Why do individuals free ride?
They are able to benefit from the public good without paying for it.
How are the supply schedule and supply curve similar?
They provide the same information.
Complete the sentence with the most suitable pairs of words: (1) is the only sustainable way to consume outside the PPF curve and (2) allows us to shift the PPF curve outward in the long run.
Trade (1); technology (2)
Assume a widget firm decides to raise prices by 10% and then sees its revenue rise by 5%. The demand for widgets must be ______________.
Unit elastic
When is it appropriate for a government to provide a subsidy?
When a transaction has positive externalities
If the price elasticity of demand for a good is relatively elastic, then ___________.
a change in the price causes a large change in quantity demanded
A government requires that its citizens pay 20 percent on all annual income regardless of what they earn. This is an example of ____.
a direct, proportional tax
The production function gives the relationship between:
a given combination of inputs and all possible levels of output
Economic costs include _______________.
accounting costs plus opportunity costs
The law of diminishing returns states that ______________.
adding more of one factor of production eventually yields smaller increases in output
A consumer may choose to consume at a point that falls ___________.
anywhere on or below the budget line
A model of market economy that shows the flow of dollars between households and firms is a/an:
circular flow
Which of the following is a public good?
clean air
Which type of good is excludable and non-rivalrous?
club goods
An incentive when a promise of some sort of punishment if the wrong decision is made is a/an ______________ incentive.
coercive
Raw materials, agricultural and other primary products as objects of large-scale trading in specialized exchanges is a:
commodity
Which type of good is non-excludable and rivalrous?
common goods
A graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price is a:
demand curve
Making good, thorough, or careful use of resources; not consuming extra. Especially, making good use of time or energy is considered:
efficient
An impact, positive or negative, on any party not involved in a given economic transaction or act is a/an:
externality
The circular flow diagram illustrates the exchange between __________.
firms and households
Total cost is equal to ___________.
fixed cost plus variable cost
A good that is perfectly elastic will have a ___________.
horizontal supply curve
Something that motivates an individual to perform an action is a/an:
incentive
An increase in the general level of prices or in the cost of living is:
inflation
The work done by human beings to create a manufactured output is:
labor
A good for which demand increases more quickly than income is a _______________.
luxury good
The additional cost from taking a course of action is a/an:
marginal cost
A firm's profit-maximizing quantity is found at the intersection of ____ and ____ .
marginal revenue; marginal cost
A commodity which is judged that an individual or society should have on the basis of some concept of need, rather than ability and willingness to pay is a:
merit good
If a worker chooses to work more when the wage rate rises, leisure is a(n) ___________.
ordinary good
Imagine an indifference curve for two goods that is a straight line with the same x- and y-intercepts. The two goods are __________.
perfect subtistutes
The quantity of payment or compensation given by one party to another in return for goods or services is:
price
A government-imposed price control or limit on how high a price is charged for a product is a:
price ceiling
A numerical measure of the responsiveness of the quantity supplied of a product to a change in the price of the product alone is:
price elasticity of supply
A mandated minimum price for a product in a market is a:
price floor
A price ceiling will typically cause ____________.
prices and quantity supplied that are too low
A good that is excludable and rival would belong to which category of goods?
private goods
The amount that producers benefit by selling at a market price that is higher than the lowest price at which they would be willing to sell is a/an:
producer surplus
A good that is both non-excludable and non-rivalrous in that individuals cannot be effectively excluded from use and where use by one individual does not reduce availability to others is a:
public good
Which type of good is non-excludable and non-rivalrous?
public goods
The production possibilities frontier illustrates ___________.
the different combinations of outputs that can be produced by an economy
What is a cost that changes with the change in volume of activity of an organization?
variable cost
Health, safety, happiness and prosperity; well-being in any respect is:
welfare
In order to maximize possible utility, consumers will consume to a point that lies ____________.
where the indifference curve is tangent to the budget line