Exam 1 (Chapters 1-4)

(Exhibit: Demand and Supply) What is the equilibrium price? $2 $4 $6 $8

4

(Exhibit: Demand and Supply) Given the demand curve, what is the price some buyers are willing and able to pay for 3 units? $2 $4 $6 $8

$8

A shortage of 210 bags of chocolate-covered peanuts exists if the price is ________ cents per bag.

A shortage of 210 bags of chocolate-covered peanuts exists if the price is ________ cents per bag.

Consumer preferences, prices of related goods, income, and demographic characteristics are often termed:

Demand shifters

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

a change in quantity supplied is a movement along the supply curve, and a change in supply is a shift of the supply curve

D 1 and S 1 are original supply and demand curves, and S 2 and D 2 are new curves. In this market for a normal good, the shift in the demand curve may have been a result of;

consumers expecting the price to go up.

The law of demand implies that

consumers will, all other things unchanged, buy more at lower prices

If both the demand for a product and the supply of it decrease, then the equilibrium quantity will ________ and the equilibrium price will ________ increase; either increase, decrease, or remain constant decrease; either increase, decrease, or remain constant increase; increase increase; decrease

decrease; either increase, decrease, or remain constant

Two components of labor are residential location and education. natural ability and human capital. money and financial wealth. ingenuity and job-specific machinery

natural ability and human capital

The best example of an increase in capital is: The discovery of new oil reserves. new computer software. legal immigration of computer programmers. conversion of military facilities to civilian uses

new computer software.

In the 1990s, the Monks of St. Benedict's the Monks determined that their ________ were ________ in the egg and cookie business, so they ________.

opportunity costs; too high; switched to providing private retreat

The exhibit shows how supply and demand might shift in response to specific events. Suppose scientists discover that eating asparagus slows down the aging process. Which panel best describes how this will affect the market for asparagus?

panel a

If the demand for housing increases and the supply of housing decreases:

price will increase, but the quantity change is indeterminate

The model that shows the goods and services the economy is capable of producing is the model of: utility. The fallacy of composition. production possibilities. scarcity.

production possibilities.

If economists say, "the price is too high," they mean that: quantity demanded is greater than quantity supplied. quantity supplied is greater than quantity demanded. the equilibrium price exceeds the current price. the price of a good will tend to increase.

quantity supplied is greater than quantity demanded.

(Exhibit: Demand and Supply of Wheat) If a price of $10 temporarily exists in this market, a:

surplus of 8,000 bushels will result

An example of a supply shifter is: demographic characteristics. technology. income. consumer expectations

technology

(Exhibit: Sugar and Freight Trains) The "bowed-out" shape of the production possibilities curve shown here demonstrates that freight trains cost more than sugar. that sugar costs more than freight trains. that the opportunity cost of additional freight trains increases as the economy produces more and more of them. that the opportunity cost of additional freight trains decreases as the economy produces more and more of them

that the opportunity cost of additional freight trains increases as the economy produces more and more of them.

If there are no restrictions on the actions of buyers and sellers, the market price and quantity will tend toward ________ and ________ units, respectively.

$15; 150

A surplus of 200 units will occur at a price of ________ and a shortage of 200 units will occur at a price of ________.

$25; $10

(Exhibit: Demand and Supply Curves) The highest price per unit that buyers would be willing to pay for 250 units is: $0. $5. $10. $15

$10.

Which of the following is true?

If demand decreases, the demand curve shifts to the left

In the Case in Point on campus parking, the implication was that existing prices for parking spaces on university campuses are generally:

Too low

Two goods are substitutes if: an increase in the price of one leads to a shift to the left in the demand curve for the other. an increase in the price of one leads to an increase in demand for the other. an increase in the price of one will increase the supply of the other. a fall in the price of one leads to a reduction in supply for the other

an increase in the price of one leads to an increase in demand for the other.

A decrease in the price of music licenses sold by music companies to online sites would result in a change illustrated by:

the move from n to o in Figure (a)

If Farmer Sam MacDonald can produce 200 pounds of cabbages and 0 pounds of potatoes or 0 pounds of cabbages and 100 pounds of potatoes and faces a linear possibilities curve for his farm, the opportunity cost of producing an additional pound of cabbage is _______ pound(s) of potatoes 1/2 2 100 200

1/2

(Exhibit: Production Possibilities Curve for Firms A and B) In Firm B, the opportunity cost of producing 1 more unit of good X is: 1/2 unit of Y. 2 units of Y. 20 units of Y. 40 units of Y

1/2 unit of Y.

(Exhibit: Sugar and Freight Trains) Suppose the economy is operating at point A, producing 244 tons of sugar and 1 freight train. The opportunity cost of producing the second freight train is: 225 tons of sugar. 25 tons of sugar. 19 tons of sugar. 6 tons of sugar

19 tons of sugar

(Exhibit: The Market for Chocolate-Covered Peanuts) A surplus of 210 bags of chocolate-covered peanuts exists if the price is ________ cents per bag 90 80 60 40

90

The gains or benefits from trade are: A result of more efficient resource utilization. based on different wage rates in different countries. greater when rich nations trade with poor nations. based on the principle of absolute advantage

A result of more efficient resource utilization

An increase in supply, with no change in demand, will lead to ________ in equilibrium quantity and ________ in equilibrium price

An increase: a decrease

After graduation from college you will receive a substantial increase in your income from a new job. If you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger would be considered a(n):

Inferior good

(Exhibit: Production Possibilities Curve 2) The point representing a combination of consumer goods and capital goods that would result from underutilization or inefficient use of society's available resources is point: N. P. Q. R.

N

(Exhibit: Production Possibilities Curve 2) The economy will experience its least growth by operating at point N. P. Q. R.

P

(Exhibit: Demand Shifters and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the technology for producing snowboards improves. Which panel best describes how this will affect the market for winter parkas, a complement of snowboards? Panel (a) Panel (b) Panel (c) Panel (d)

Panel (a)

(Exhibit: Demand and Supply—Determinants) The exhibit shows how supply and demand might shift in response to specific events. Suppose consumer incomes decrease. Which panel best describes how this will affect the market for used clothing, an inferior good? Panel (a) Panel (b) Panel (c) Panel (d)

Panel (a)

(Exhibit: The Determinants of Demand and Supply) The exhibit shows how supply and demand might shift in response to specific events. Suppose a new machine is developed that allows restaurants and fast-food outlets to produce French fries at a lower cost. Which panel best describes how this will affect the market for French fries? Panel (a) Panel (b) Panel (c) Panel (d)

Panel (a)

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the Surgeon General announces that eating chocolate prevents heart disease. Which panel best describes how this will affect the market for chocolate? Panel (a) Panel (b) Panel (c) Panel (d)

Panel (b)

(Exhibit: Demand and Supply—Determinants) The exhibit shows how supply and demand might shift in response to specific events. Suppose the birth rate (the number of babies per female in the childbearing age bracket) decreases. Which panel best describes how this will affect the market for diapers? Panel (a) Panel (b) Panel (c) Panel (d)

Panel (b)

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the technology for producing handheld calculators improves. Which panel best describes how this will affect the market for handheld calculators? Panel (a) Panel (b) Panel (c) Panel (d)

Panel (c)

(Exhibit: Demand Shifters and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose a spring frost destroys one-third of the nation's artichoke crop. Which panel best describes how this will affect the market for mayonnaise, which is a complement to artichokes? Panel (a) Panel (b) Panel (c) Panel (d)

Panel (d)

The exhibit shows how supply and demand might shift in response to specific events. Suppose the technology for producing automotive gasoline improves. Which panel best describes how this will affect the market for gasoline additives, a complement of automotive gasoline?

Panel A

The exhibit shows how supply and demand might shift in response to specific events. Suppose the price of lumber falls dramatically. Which panel best describes how this will affect the market for houses?

Panel c

Assume a market initially exhibits a shortage. Assuming that both prices and quantities are flexible, which of the following will be true after the market adjusts to equilibrium? Price is lower. Quantity demanded is greater. Quantity supplied is more. Quantity supplied will be reduced.

Quantity supplied is more

There is an increase in incomes. What happens in the market for steak?

The equilibrium price and quantity rise

The price of apples falls. What happens in the market for apple pies?

The equilibrium price falls, and the equilibrium quantity rises

By specializing in the production of particular goods in which it has a comparative advantage, a nation is: less likely to make efficient use of available resources. less likely to engage in international trade. able to become self-sufficient. able to operate efficiently

able to operate efficiently

(Exhibit: Bicycles and Radishes 1) The exhibit shows production possibilities curves for two countries that produce only radishes and bicycles. The axes of both graphs are measured in equivalent units. Country A is now operating at point M, and Country B is now operating at point N. Suppose Country B wants to be able to produce more radishes and more bicycles. To do this, it must: Use its resources more efficiently. achieve full employment in its use of resources. acquire more capital, more labor, more natural resources, and/or better technology. do all of the above.

acquire more capital, more labor, more natural resources, and/or better technology

One of the two criteria for a resource to be considered as a natural resource is that it must: have been produced. be found in nature. be part of a factory or building. not be used to produce goods and services

be found in nature

(Exhibit: Guns and Butter) The combination of guns and butter at point H: can be obtained, but would cost too much. cannot be attained given the level of technology and the factors of production available. has no meaning since it does not relate to the preferences of consumers. Is attainable but would increase unemployment

cannot be attained given the level of technology and the factors of production available

If a production possibilities curve were bowed in or convex to the origin of a graph, it would demonstrate: increasing opportunity cost. decreasing opportunity cost. constant opportunity cost. fluctuating opportunity cost

decreasing opportunity cost

The relationship between the price of a good and the quantity people are willing and able to purchase is:

demand

(Exhibit: Simultaneous Shifts in Demand and Supply) D 1 and S 1 are original supply and demand curves, and S 2 and D 2 are new curves. In this market for a normal good supply has increased and price has increased. demand has increased and price has increased. demand has decreased and price has fallen. demand has increased and price has fallen

demand has increased and price has fallen.

An increase in the demand for medical services caused by an increase in the number of people over 65 is most likely attributable to which demand shifter?

demographic characteristics

In enforcing the legal system, the government in a market capitalist economy acts to: enforce contracts. enforce property rights. discourage fraud. do all of the above

do all of the above.

A market shortage occurs if the

equilibrium price is above the current price

(Exhibit: The Market for Music Downloads) An increase in the wage rate paid to web site technical support employees would result in a change illustrated by the move from: f to g in Figure (a). g to f in Figure (a). i to h in Figure (b). h to i in Figure (b).

h to i in Figure (b).

An economy is said to have a comparative advantage in producing a particular good if it: can produce more of all goods than another economy. can produce less of all goods than another economy. has the highest cost for producing that good. has the lowest cost for producing that good

has the lowest cost for producing that good.

Labor is the _____ that can be applied to production the natural environment. produced resources. financial assets. human effort

human effort

If both the demand for a product and the supply of it increase, then the equilibrium quantity will ________ and the equilibrium price will ________ decrease; increase decrease; decrease decrease; remain constant increase; either increase, decrease, or remain constant

increase; either increase, decrease, or remain constant

(Exhibit: Bicycles and Radishes 2) The country depicted in this exhibit is currently operating at point M. It could achieve production at point I only if it: used its resources more efficiently. devoted more resources to radish production. devoted more resources to bicycle production. increased the quantities of capital, natural resources, or labor available or improved its technology

increased the quantities of capital, natural resources, or labor available or improved its technology

(Exhibit: Guns and Butter) If the economy were operating at point B, producing 16 units of guns and 12 units of butter per period, a decision to move to point E and produce 18 units of butter: indicates you can have more butter and guns simultaneously. makes it clear that this economy experiences decreasing opportunity costs. involves a loss of 8 units of guns per period. involves a loss of 4 units of guns per period

involves a loss of 8 units of guns per period

(Exhibit: Consumer and Capital Goods) Point Z: is unattainable, all other things unchanged. is attainable if the economy is able to get to full employment. is attainable if the quantity and/or quality of factors decreases. will be attained as soon as the economy becomes efficient and moves to Curve 2.

is unattainable, all other things unchanged

(Exhibit: The Market for Music Downloads) A decrease in buyers' income, assuming music downloads are a normal good, combined with a decrease in the wage rate paid to web site technical support employees would result in a change illustrated by the move from: j to m in Figure (c). g to f in Figure (a). i to h in Figure (b). h to i in Figure (b).

j to m in Figure (c).

If demand and supply both shift to the right, then both price and quantity will go up. price will go down and quantity will go up. quantity will go down and price will go up. quantity will go up, but price could go up, down, or stay the same

quantity will go up, but price could go up, down, or stay the same

Supply is best defined as the: relationship between the quantity of a good or service buyers are able to purchase, all other things unchanged. relationship between the quantity of a good or service buyers are willing to purchase, all other things unchanged. relationship between the quantity of a good or service sellers are willing to offer for sale and various prices, all other things unchanged. quantity of a good or service sellers are willing to offer for sale at a specific price, all other things unchanged

relationship between the quantity of a good or service sellers are willing to offer for sale and various prices, all other things unchanged

Which of the following will not lead to economic growth? increased immigration restrictions on international trade introduction of faster computers opening all federal lands to mining

restrictions on international trade

In a competitive market, if there should be a surplus of a product at a given price:

sellers will drive the price down

In a competitive market, if there should be a surplus of a product at a given price: sellers will drive the price down. sellers will drive the price up. buyers will drive the price up. the price will tend to remain constant.

sellers will drive the price down

Increases in resources or improvements in technology will tend to cause a society's production possibilities curve to: shift inward to the left. shift outward to the right. remain unchanged. become vertical

shift outward to the right.

A decrease in supply means:

shift to the left of the entire supply curve

Two friends, one an engineer and the other an accountant, decide to form a partnership. If the accountant takes care of the books and the engineer runs the factory, they are likely to enhance the economy's productivity through scarcity. specialization of labor. a shift in the production possibilities curve. a movement along the production possibilities curve.

specialization of labor

Every day for the past two years you've had ham and cheese on a whole wheat bagel for lunch at Bungalow Bob's Bagel Boutique. However, the price of whole wheat bagels has risen by 10 cents so today you decide to have ham and cheese on a rye bagel. In this case, whole wheat and rye bagels are best considered superior goods. normal goods. substitute goods. complementary goods

substitute goods.

Plastic and steel are substitutes in the production of automobiles. If steel prices go up, all other things unchanged the equilibrium price of plastic will fall. the demand curve for plastic will shift to the left. the demand curve for plastic will shift to the right. the equilibrium quantity of plastic demanded will increase and the equilibrium price will fall.

the demand curve for plastic will shift to the right

If wages are higher in the United States than in Brazil, then trade is still beneficial to the United States and Brazil. Brazil will not have a comparative advantage in the production of any good. the United States cannot have a comparative advantage in the production of any good. trade with Brazil will clearly lower wages in the United States

trade is still beneficial to the United States and Brazil.