Final

If a 15% increase in price for a good results in a 20 percent decrease in quantity demanded, the price elasticity of demand is

1.33

Refer to Figure 4-5. If these are the only two sellers in the market, then the market quantity supplied at a price of $4 is

14 units

Refer to Table 6-1. How many units of the good are purchased after the imposition of the price floor?

5

"Minimum wage laws result in unemployment" is a normative statement, while "the minimum wage should be higher" is a positive statement.

False

Positive statements are descriptive, while normative statements are prescriptive.

True

Which of the following would shift the supply of Green Bay Packers football jerseys to the left?

The cost of the fabric used to make the jerseys increases.

Movie tickets and film streaming services are substitutes. If the price of film streaming increases, what happens in the market for movie tickets?

The demand curve shifts to the right

Which of the following would cause a demand curve for a good to be price inelastic?

The good is a necessity.

Suppose the equilibrium price for apartments is $800 per month and the government imposes rent controls of $500. Which of the following is unlikely to occur as a result of the rent controls?

The quality of apartments will improve.

Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which results in an increase in drunk driving. This illustrates the principle that people respond to incentives.

True

Refer to Figure 6-5. Which of the following statements is not correct?

When the price is $6, there is a surplus of 8 units.

Which of the following shifts the supply curve for pizza to the right?

a decrease in the price of cheese, an input to pizza

A group of buyers and sellers of a particular good or service is called

a market.

The term market failure refers to

a situation in which the market on its own fails to allocate resources efficiently.

Refer to Figure 6-4 . In graph (b), there will be

a surplus.

Which of the following will shift the demand curve for pizza to the right?

an increase in the price of hamburgers, a substitute for pizza

If the income elasticity of demand for a good is negative, it must be

an inferior good

Refer to Figure 6-9. In this market, a minimum wage of $7.00 is

binding and creates unemployment.

Making rational decisions at the margin means that people

compare the marginal costs and marginal benefits of each decision

If the cross-price elasticity between two goods is negative, the two goods are likely to be

complements.

The line that relates the price of a good and the quantity demanded of that good is called the demand

curve, and it usually slopes downward.

In a market with a binding price ceiling, increasing the ceiling price will

decrease the shortage.

The law of demand states that, other things equal, when the price of a good

falls, the quantity demanded of the good rises.

Refer to Figure 6-1. A binding price ceiling is shown in

graph (b) only.

The "invisible hand" refers to

how the decisions of households and firms lead to desirable market outcomes

If the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the quantity sold in the market will increase.

Refer to Figure 6-1. The price ceiling shown in graph (a)

is not binding.

If supply is price inelastic, the value of the price elasticity of supply must be

less than 1.

Goods with many close substitutes tend to have

more elastic demands.

A competitive market is a market in which

no individual buyer or seller has any significant impact on the market price.

Where can an economy not produce?

outside its production possibilities frontier

The production possibilities frontier provides an illustration of the principle that

people face trade-offs

A demand schedule is a table that shows the relationship between

price and quantity demanded.

In general, a flatter demand curve is more likely to be

price elastic.

In general, a steeper supply curve is more likely to be

price inelastic

What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?

scarcity

Refer to Figure 6-9. In this market, a minimum wage of $7.00 creates a labor

surplus of 4,000 worker hours

For a good that is a luxury, demand

tends to be elastic

The bowed-outward shape of the production possibilities frontier can be explained by the fact that

the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing

The price elasticity of demand is defined as

the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good

If the price of a good is equal to the equilibrium price,

the quantity demanded is equal to the quantity supplied and the price remains unchanged.

If the price of a good is below the equilibrium price,

there is a shortage and the price will rise.

If the price of a good is above the equilibrium price,

there is a surplus and the price will fall.

"Society would be better off if the welfare system were abolished" is a normative statement, not a positive statement.

true

Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.

true

If an economy can produce more of one good without giving up any of another good, then the economy's current production point is inefficient.

true

Points inside the production possibilities frontier represent inefficient levels of production.

true

Points on the production possibilities frontier represent efficient levels of production.

true

Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity.

true

If an increase in the price of a good has no impact on the total revenue in that market, demand must be

unit price elastic.

Economics is the study of how society manages its

unlimited wants and limited resources

The opportunity cost of an item is

what you give up to get that item.