Economics

If Scottie can produce potato chips at a lower opportunity cost than Peyton, then:

Scottie has a comparative advantage in the production of potato chips.

According to the law of demand, an increase in the price of beef leads to, ceteris paribus:

a decrease in the quantity demanded of beef.

Ceteris paribus, an increase in the price of cereal leads to:

a decrease in the quantity demanded of cereal.

An import is:

a good or service produced in a foreign country, but sold in the domestic country.

An export is:

a good or service produced in the domestic country, but sold in a foreign country.

The graph of a negative, or inverse, relationship between two variables is a:

a line that slopes downward to the right.

The federal government should provide basic health care services for all U.S. citizens is an example of:

a normative macroeconomic statement.

Economics is:

a social science that studies how choices are made and the consequences of those choices.

Government control of resources and centralized decision-making are characteristics of:

command economies.

If quantity demanded is 30 when price is $3 and quantity demanded is 20 when price is $5, then total revenue __ if price increases from $3 to $5, implying that demand is _.

increases; inelastic

Products that are necessities with no close substitutes tend to have _ demand curves.

inelastic

The demand for a life-saving drug is likely to be:

inelastic because the drug is a necessity.

If the demand for widgets decreases as consumer income increases, widgets must be a(n) ____ with a ___ income elasticity of demand.

inferior good; negative

Beth quit her job as a computer programmer for a large corporation to begin her own computer repair business in her garage. To do this, she took $10,000 out of her retirement fund and hired her brother, Will, on an hourly basis. As a factor of production, Will is best classified as:

labor.

When government allows economic problems to take their own course and fix themselves, it is taking a:

laissez-faire approach to an economic problem.

If the demand for electricity is inelastic but not perfectly inelastic, a 10% increase in the price of electricity is likely to:

lead to a decrease in the quantity demanded of electricity of less than 10%.

Suppose a Fitness Center has determined that the price elasticity of demand for monthly memberships is equal to 1.8. As a result, if the center seeks to increase revenue, it should:

lower price since demand is relatively elastic.

The unemployment rate increases when the economy is in a recession.

positive macroeconomic

People are likely to buy more new cars if the price of new cars fall substantially.

positive microeconomic

The law of demand states that:

price and quantity demanded are inversely (negatively) related, ceteris paribus.

The law of supply indicates that:

price and quantity supplied are directly (positively) related.

If basketball for recreation becomes more popular at the same time that the cost of producing basketballs falls, supply and demand analysis predicts that the equilibrium:

quantity of basketballs will increase but the equilibrium price might rise, fall, or stay the same.

In the market for used cars, a shortage of used cars would, ceteris paribus:

put upward pressure on the price of used cars.

A legal limit on the quantity of a product that can be imported from other countries is called a:

quota

Assume a university, seeking to increase parking revenue, hires a consultant to analyze the demand for covered parking on campus. If the consultant determines that the price elasticity of demand coefficient for covered parking is 0.65, then the university should be advised to:

raise the price of covered parking on campus.

The shift from PPF1 to PPF2 implies all of the following EXCEPT:

the maximum amount of each good that can be produced increased.

Points on a production possibilities frontier imply that:

the maximum amount of goods is being produced, given the available resources and technology.

Suppose you are offered a coupon for a free dinner at a local restaurant, tip and drink included, if you attend a presentation for prospective renters at a new apartment complex in town. If you attend the presentation, then:

the opportunity cost of using the coupon for the dinner is the best alternative use of the time you spent at the presentation.

Cross elasticity measures:

the percentage change in the quantity demanded of one product divided by the percentage change in the price of a different product.

Demand is perfectly inelastic

0

Demand is relatively inelastic

0.35

Assume an increase in the price of a magazine from $3 to $4 causes the quantity demanded of the magazine to decrease from 5,000 to 4,000 copies per month. Using the midpoint formula, the price elasticity of demand coefficient for the magazine is approximately:

0.78

Use the midpoint formula to calculate the price elasticity of demand coefficient for a product if quantity demanded is 30 when price is $3 and quantity demanded is 20 when price is $5.

0.8

Demand is unit elastic

1

The basic economic questions that must be addressed by society include:

1. what outputs should be produced 2.how should outputs be produced 3.who gets to consume the outputs produced

Use the midpoint formula to calculate the price elasticity of demand coefficient for a product if quantity demanded is 125 when price is $4 and quantity demanded is 75 when price is $6.

1.25

Using the midpoint formula, if quantity demanded is 175 when price is $1.10 and quantity demanded is 225 when price is $0.90, the absolute value of the price elasticity of demand coefficient is equal to:

1.25.

Suppose Dallas Maverick Luka Doncic scored a total of 280 points in his first 10 games. If Luka scored 50 points in his 11th game, then:

1.Luka averaged 28 points per game for his first 10 games. 2.Luka's margin of 50 points in his 11th game is greater than his average of 28 points so his average points per game will increase. 3.Luka averaged 30 points per game for the 11 games.

If an 8% increase in the price of a product results in a 4% decrease in the quantity demanded of the product, then the absolute value of the price elasticity of demand coefficient is _ and demand is said to be _.

1/2; inelastic

Demand is relatively elastic

2.5

If a 5 percent decrease in the price of a good results in a 10 percent increase in the quantity demanded, the absolute value of the price elasticity of demand coefficient is __, and demand is said to be ___.

2; elastic

Which of the following events would cause the demand for tennis balls to increase?

A decrease in the price of tennis racquets, a complement for tennis balls

In the circular flow of economic activity:

A.firms supply final goods and services to output markets in exchange for sales revenue. C.households supply factors of production in resource markets in exchange for income.

Which of the following events will most likely cause an increase in the supply of apple juice, ceteris paribus?

An increase in the number of apple trees planted in orchards

Which of the following would lead to an increase in the supply of coffee, ceteris paribus?

An increase in the number of firms selling coffee

Which of the following will cause a decrease in the demand for batteries?

An increase in the price of digital cameras, a complement for batteries

Which of the following would lead to a decrease in the supply of desk top computers, ceteris paribus?

An increase in the wages paid to desk top computer factory workers

Which of the following statements is not true with respect to the economic factors of production?

Capital includes shares of corporate stock and government bonds.

If Janet can produce more baskets per hour than Karen, then:

Janet has an absolute advantage in the production of baskets.

Which of the following is not a macroeconomic policy goal of a market economy?

Equal income distribution

Demand decreases or shifts to the left.

Equilibrium price and quantity both decrease.

Demand increases or shifts to the right.

Equilibrium price and quantity both increase.

Supply increases or shifts to the right.

Equilibrium price decreases and equilibrium quantity increases.

Supply decreases or shifts to the left.

Equilibrium price increases and equilibrium quantity decreases.

Sarah argues that free trade must be bad for the economy because some people might lose their jobs due to foreign competition.

Fallacy of Composition

Leslie argues that each industry must benefit from technological advances because technological advances contribute to economic growth in a country.

Fallacy of Division

Sales of ice cream increased and then the crime rate increased so eating ice cream must lead to criminal behavior.

Fallacy of False Cause

A country has a trade deficit when the dollar value of exported goods and services exceeds the dollar value of imported goods and services.

False

An import is a good or service produced in the domestic country, but sold in the foreign country.

False

Which statement below is false?

Government directs resources to their highest valued use in a market economy.

Which of the following pairs of goods is most likely to have a cross elasticity of demand coefficient of -1.2?

Hot dogs and relish

The interaction of individuals in markets directs production and consumption decisions

Market Economy

The U.S economy

Mixed Economy

The price of tea (a substitute for coffee) decreases.

The demand for coffee decreases or shifts to the left.

Which of the following pairs of goods is most likely to have a cross elasticity greater than zero?

Orange juice and apple juice

An example of a positive microeconomic statement is:

People tend to buy more chicken when the price of beef increases.

Government directs many production and consumption decisions

Planned Economy

If drought conditions in the farm belt result in a decrease in the supply of wheat, what will happen to the equilibrium price and quantity of wheat, other things held constant?

Price increases and quantity decreases

Private ownership of all factors of production

Pure Capitalist Economy

Which of the following is a positive statement?

Some parents do not have the financial resources to pay for their children to attend college.

Which of the following pairs of goods is most likely to have a cross elasticity of demand coefficient of -1.2?

Tennis rackets and tennis balls

Which of the following statements about the production possibilities model is NOT true?

The PPF shifts out to the right when an economy goes from inefficient use of resources to efficient use resources.

All points on and inside a PPF represent combinations of two outputs that are attainable and efficient.

The above statement is false.

In the Production Possibilities Model, economic growth is illustrated by moving from a point inside a PPF to a point on a PPF.

The above statement is false.

Movements from point to point along the PPF indicate changes in the technology used in production.

The above statement is false.

Production is more efficient at points on the upper left portion of the PPF than on the lower right portion of the PPF.

The above statement is false.

A bowed-out PPF indicates increasing opportunity cost.

The above statement is true.

A straight-line PPF indicates constant opportunity cost.

The above statement is true.

Combinations of outputs on the PPF represent the maximum amount the economy can produce, ceteris paribus.

The above statement is true.

If an economy is operating at a point on its PPF, the resources available to use in production are fully employed.

The above statement is true.

Points outside a PPF are unattainable, ceteris paribus.

The above statement is true.

The Production Possibilities Model assumes that the amount of resources available to use in production is fixed.

The above statement is true.

Consumers expect the price of hand sanitizer to increase in the future.

The current demand for hand sanitizer increases or shifts to the right.

Consumer income decreases as a result of a recession

The demand for inferior goods increases or shifts to the right.

The cost of manufacturing automobiles increases.

The supply of automobiles decreases or shifts to the left.

Technological improvements reduce the cost of assembling cell phones.

The supply of cell phones increases or shifts to the right.

The number of fast-food restaurants located near campus increases.

The supply of eating establishments increases or shifts to the right.

An export is a good or service produced in the domestic country, but sold in the foreign country.

True

If the income elasticity for macaroni and cheese is a negative number, this means the product is an inferior good.

True

If the equation of a line is Y = 10 - 3X, then all of the following are true except:

X and Y are positively related.

The primary difference between a change in supply and a change in the quantity supplied is:

a change in quantity supplied is caused by a change in the price of the good itself, and a change in supply is caused by a change in a non-price determinant of supply.

Graphing a Production Possibilities Frontier assumes all of the following except:

a changing level of technology.

For a normal good, a decrease in consumer income leads to:

a decrease in demand and a decrease in both equilibrium price and quantity.

For an inferior good, an increase in consumer income leads to:

a decrease in demand and a decrease in equilibrium price.

If the supply of a resource is perfectly inelastic, a decrease in the demand for that resource will cause:

a decrease in the equilibrium price, but no change in the equilibrium quantity.

Ceteris paribus, the demand for frozen yogurt will decrease in response to:

a decrease in the price of ice cream, a substitute for frozen yogurt.

The supply of organic milk will increase as a result of:

a decrease in the price of organic feed for organic milk cows.

The demand for potato chips will increase in response to all of the following except:

a decrease in the price of potato chips.

Beth quit her job as a computer programmer for a large corporation to begin her own computer repair business in her garage. To do this, she took $10,000 out of her retirement fund and hired her brother, Will, on an hourly basis. As a factor of production, Beth is best classified as:

an entrepreneur.

For a normal good, an increase in consumer income leads to:

an increase in demand and an increase in both equilibrium price and quantity.

The demand for potato chips will increase in response to all of the following except:

an increase in the number of firms producing potato chips.

Demand is perfectly elastic

approaching infinity

Government's role in the economy is limited to activities such as providing national defense and a legal system in:

capitalist economic systems.

To understand the relationship between two specific variables, economists use the:

ceteris paribus assumption.

The role of an economic system is to:

coordinate the decisions of economic agents under conditions of scarcity.

Microeconomics studies the:

decisions and behaviors of individuals and businesses.

If a seller wants to increase revenue from the sale of a product with a price elasticity of demand coefficient of 1.6, then the seller should:

decrease price because demand is elastic.

According to the law of demand, an increase in the price of orange juice will, ceteris paribus:

decrease the quantity demanded of orange juice.

According to the law of supply, a decrease in the price of binders will, ceteris paribus:

decrease the quantity supplied of binders.

Assuming widgets are a normal good, a decrease in consumer income, ceteris paribus, will cause the equilibrium price of widgets to __ and the equilibrium quantity to____.

decrease; decrease

Ceteris paribus, an increase in the supply of a product leads to a(n) _ in the equilibrium price of the produce and a(n) _ in the equilibrium quantity of the product.

decrease; increase

A good economic theory or model:

does a good job explaining an economic relationship or predicting outcomes.

The demand for Smell-Good Shampoo is likely to be:

elastic if there are lots of good substitutes for Smell-Good Shampoo available.

If the demand function is linear and downward-sloping, demand is:

elastic on the top portion, unit elastic in the middle, and inelastic on the bottom portion of the demand function.

If the absolute value of the price elasticity of demand for tickets to musicals is 1.2, then the demand for musicals is ___ and a(n) _in the price of tickets to musicals will lead to an increase in total revenue for musical theatres.

elastic; decrease

If the U.S. has both an absolute and a comparative advantage in the production of solar panels, it should:

export solar panels to other countries.

The assumption that because the economy as a whole is better off as a result of a trade treaty, each individual industry must also be better off as a result of the treaty is an example of the:

fallacy of division.

When the government sets a minimum legal price for a good above the equilibrium price, it is setting a price ___, which tends to result in a ____ of the good.

floor; surplus

Capitalist economies are characterized by all of the following except:

government ownership of capital.

Most economic systems:

have many mechanisms that address the problem of scarcity.

Demand that is perfectly elastic graphs as a:

horizontal line.

In a market economy:

households are suppliers in resource markets and demanders in product markets.

One focus of macroeconomics is:

how the economy can achieve the goals of full employment, price stability, and economic growth.

Goods and services produced in Mexico and consumed in the U.S. are ____ for the U.S. and ____ for Mexico.

imports; exports

The law of demand states that a decrease in the price of cell phones will, ceteris paribus:

increase the quantity demanded of cell phones.

Assume generic goods are inferior goods. A decrease in consumer income (ceteris paribus) will cause the demand for generic goods to _, and the equilibrium price of generic goods will _.

increase; increase

Suppose the income elasticity for medical care is 2 and the income elasticity for dental care is 1.5; these values imply that:

medical care and dental care are both normal goods.

The U.S. economy is a:

mixed economy because it has elements of both a planned and a market system.

If the income elasticity coefficient for fish tacos is 0.25, then fish tacos are:

normal goods because the demand for fish tacos increases when income increases.

Raising taxes on corporations and wealthy individuals is the best way to balance the federal budget.

normative macroeconomic

Parking on college campuses should be free for students enrolled in college.

normative microeconomic

The responsiveness of buyers to changes in the price of a product is measured by:

price elasticity of demand.

If the number of people seeking to purchase new homes in the area increases at the same time that the prices of lumber and other homebuilding materials increase, then supply and demand analysis predicts that the equilibrium:

price of new homes will increase but the change in equilibrium quantity cannot be determined from the information given.

A country has an absolute advantage in the production of a specific product if it is able to:

produce a larger quantity of that product in a given amount of time, compared to another country.

A country has a comparative advantage in the production of a specific product if it is able to:

produce that product at a lower opportunity cost, compared to another country.

When resources are not freely available in amounts sufficient to satisfy all desired uses for them:

scarcity exists and decisions must be made about how to allocate limited resources among competing uses.

In a capitalist market economy, economic activity is mainly guided by:

self-interest.

A Production Possibilities Frontier:

shows the maximum amount of two outputs that can be produced in a given time period, ceteris paribus.

Assume an increase in the price of jean jackets leads to an increase in the quantity supplied of jean jackets. Ceteris paribus, the graph of the relationship between the price and quantity supplied of jean jackets:

slopes upward to the right illustrating a direct relationship.

If the cross elasticity of demand between goods X and Y is 2, goods X and Y are:

substitute goods.

If there is an increase in both the number of buyers and the number of sellers in a market:

supply and demand shift rightward, so equilibrium quantity will definitely increase.

A tax levied on imports is called a:

tariff.

A production possibilities frontier for two outputs is drawn assuming that:

the amount of resources currently available for production is fixed.

A country has a trade surplus when:

the dollar value of exported goods and services exceeds the dollar value of imported goods and services.

A country has a trade deficit when:

the dollar value of imported goods and services exceeds the dollar value of exported goods and services.

If the demand for chewing gum increases, ceteris paribus:

the equilibrium price and quantity of chewing gum will both increase.

If cotton clothing becomes more popular at the same time that the supply of cotton decreases, then basic supply and demand analysis predicts that:

the equilibrium price of cotton clothing will increase but the change in the equilibrium quantity of cotton clothing cannot be determined from the information given.

Employees in the defense industry have greater job security and higher pay when the country is engaged in major military conflicts, therefore it is good for the country to be involved in military conflicts is an example of:

the fallacy of composition.

An introductory course in macroeconomics is likely to study:

the impact of an increase in federal government spending on households and businesses in the U.S.

If this economy's production possibilities are represented by PPF2, the combination of civilian goods and military goods that is best, or optimal, for society is combination:

the production possibilities model does not identify which combination is optimal for society; it identifies the combinations that are possible.

After a price floor is established above the equilibrium price in the market for strawberries:

the quantity of strawberries actually bought and sold decreases.

The graph of a relationship between two variables, X and Y, shifts when:

the value of an exogenous variable, something other than X or Y, changes.

Opportunity cost is:

the value of the best alternative that must be given up when a choice is made.

The opportunity cost to Lottie of taking an hour walk instead of taking an hour nap is:

the value of the nap that Lottie gives up to take the walk.

Ceteris paribus, the demand for a product will be more elastic when:

there are many close substitutes available.

The demand for a product tends to be less elastic if:

there are very few good substitutes for the product.