MICRO Final

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Any model is based on making assumptions because A. we cannot analyze an economic issue unless we reduce its complexity. B. models have to be simplified to be useful. C. both a and b. D. neither a nor b.

both a and b

Societies organize their economies in two main ways to answer the three questions of​ what, how, and who. A society can have a ___________ economy in which the government decides how economic resources will be allocated. Or a society can have a ___________ economy in which the decisions of households and firms interacting in markets allocate economic resources.

central planned market

On the diagram to the​ right, a movement from A to C represents a

change in demand

On the diagram to the​ right, a movement from Upper B to Upper CB to C represents a

change in supply

The basis for trade is _______ advantage.

comparative

The difference between a change in supply and a change in the quantity supplied is that the latter is

displayed graphically as a movement along a supply curve while the former is shown as a shift in the supply curve.

_______ is the study of the choices people make to attain their​ goals, given their scarce resources.

economics

If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in the quantity demanded of 25​ percent, demand for Red Bull is​ _______ in this range.

elastic

MIT economist Jerry Hausman has estimated the price elasticity of demand for Post Raisin Bran cereal to be minus−2.5 and the price elasticity of demand for all types of breakfast cereals to be minus−0.9. The demand for Post Raisin Bran cereal is ____ and the demand for all types of breakfast cereals is ____ Why might the demand for Post Raisin Bran cereal be more elastic than the demand for all types of breakfast​ cereals? Post Raisin Bran cereal

elastic inelastic has more substitutes available

In economic​ terminology, the inputs used to make goods and servicesmake goods and services are referred to as

factors of production

In economic​ terminology, the inputs used to make goods and services are referred to as

factors of production.

If the market price ​'Pmkt​' is aboveabove the price ​'P0​', then quantity supplied is ______ quantity demanded and the market is in a _______

greater than surplus

In the United​ States, who receives the goods and services produced depends largely on

how income is distributed

What is the outcome of enforcing contracts and property rights in a market​ system?

increased economic activity

Consider the market for iPhonesiPhones. Suppose household income increasesincreases. Use the line drawing tool to show how this affects the demand for iPhonesiPhones by drawing a new demand curve. Assume iPhonesiPhones are a normal good. Properly label this line. Carefully follow the instructions​ above, and only draw the required objects. According to the​ graph, when income increasesincreases​, the demand for iPhonesiPhones Instead, consider an inferior good. If income increasesincreases​, then the demand for an inferior good

increases decreases

On the diagram to the​ right, movement along the curve from points A to B to C illustrates

increasing marginal opportunity costs.

The price of organic apples fallsfalls and apple growers find that their revenue decreasesdecreases. Is the demand for organic apples elastic or​ inelastic? The demand for organic apples is

inelastic

Indicate whether each of the following is primarily a microeconomic issue or a macroeconomic issue. a. The effect of higher cigarette taxes on the quantity of cigarettes sold. This is a ____ issue b. The effect of higher income taxes on the total amount of consumer spending. This is a _______ issue. c. The reasons for the economies of East Asian countries growing faster than the economies of​ sub-Saharan African countries. This is a _______ issue. d. The reasons for low rates of profit in the airline industry. This is a _____ issue.

micro macro macro micro

Consider the demand for large homeslarge homes illustrated in the figure to the right. What demographic change would likely result in the demand curve for large homeslarge homes shifting to the rightright​? The demand curve for large homeslarge homes would likely shift to the rightright if the

portion of the population that is elderly decreases

The diagram to the right illustrates a very important relationship in economics between two​ variables: the price of a good and the quantity demanded of that good. The two variables in this diagram​ are:

price​ (dollars per​ bushel) on the vertical axis and quantity​ (bushels per​ week) on the horizontal axis.

The principle of increasing marginal opportunity cost states that the more resources devoted to any​ activity, the​ __________ the payoff to devoting additional resources to that activity.

smaller

When the demand curve shifts to the​ right,

the equilibrium price and quantity will both increase.

Opportunity cost is

the highest valued alternative that must be given up to engage in an activity.

The formula for the price elasticity of supply is If an increase of 11 percent in the price of frozen pizzas results in a 5 percent increase in the quantity of frozen pizzas​ supplied, the price elasticity of supply for frozen pizzas is Is the supply of pizzas elastic or​ inelastic? The supply of frozen pizzas is

the percentage change in quantity supplied divided by the percentage change in price. .45 inelastic

When the federal government crafts environmental policies that make it less expensive for firms to follow green​ initiatives,

the policies are consistent with economic incentives.

Macroeconomics is

the study of the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Below are both a supply schedule and a supply curve. Which one is best suited to find the quantity supplied at a price of​ $4.50?

the supply curve

In the diagram to the​ right, point Upper G indicates an

unattainable result

The distinction between a normal and an inferior good is

when income​ increases, demand for a normal good increases while demand for an inferior good falls.

A free market exists

when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.

Why are models based on​ assumptions?

Because models have to be simplified to be useful.

Market price is determined by

both supply and demand

The production possibilities frontiers depicted in the diagram to the right illustrate

both the labor force and capital stock increasing

Consider the supply of crude oil on the world market. In August​ 2011, the price of oil was roughly​ $80 per barrel. Which of the following changes would increase the supply of​ oil? The oil supply curve would shift to the right if

future oil prices were expected to be lower.

Two key groups participate in markets. A ______ consists of all the individuals in a home. ______ are suppliers of goods and services. We can use a simple economic model call the ______ to see how participants in markets are linked.

household firms circular- flow diagram

Two key groups participate in markets. A _____ consists of all the individuals in a home. ______ are suppliers of goods and services We can use a simple economic model called the _______ to see how participants in markets are linked.

household firms circular flow diagram

In the​ circular-flow diagram showing how a market system​ works,

income flows to firms through product markets.

In the​ circular-flow diagram showing how a market system​ works,

income flows to households through factor markets

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls

scarcity

In a graph​ (not shown) of the banana market in the United​ States, the imposition of a tariff on banana imports would

shift supply​ leftward, increasing equilibrium price and decreasing equilibrium quantity.

The distinction between substitutes and complements is

substitute goods are used for the same purposes while complementary goods are used together.

Equity is

the fair distribution of economic benefits.

In a market​ system, how does society decide what goods and services will be​ produced?

​Consumers, firms, and the government determine what goods and services will be produced by the choices they make.

​Trade-offs force society to make​ choices, particularly when answering the following three fundamental​ questions:

​One, what goods and services will be​ produced? Two, how will the goods and services be​ produced? Three, who will receive the goods and services​ produced?

In the diagram to the​ right, the curve labeled​ "S" is apparently​ _____, while the curve labeled​ "D" is apparently​ _____.

​nonlinear; linear

The people of a previously quiet and peaceful country have come to recognize the need to expand and improve their security forces after a wave of terroristic threats and acts. Considering their resource​ limitations, the extent to which security is enhanced will most likely be determined by

​society's willingness to forego other goods and​ services, both public and private.

The diagram to the right illustrates a hypothetical demand curve representing the relationship between price​ (in dollars per​ unit) and quantity ​(in ​1,000s of units per unit of time​). Total revenue is ​$______

2000

The diagram to the right illustrates a hypothetical demand curve representing the relationship between price​ (in dollars per​ unit) and quantity​ (in 1,000s of units per unit of​ time). The area of the triangle shown on the diagram is ​$______

392000

You have exams in economics and chemistry coming up and 5 hours available for studying. The following table shows the​ trade-offs you face in allocating the time you will spend in studying each subject. If you are at point​ C, what is the opportunity cost of increasing your chemistry score by studying one additional hour for the chemistry​ exam? ______ fewer points on your economics exam.

4

Consider the market for​ gasoline, illustrated in the figure to the right. The equilibrium quantity of gasoline is ____ million gallons ​(enter a numeric response using a real number rounded to two decimal​ places) and the equilibrium price is ____ per gallon If instead the market price were ​$3.25​, then there would be a _____ of ____ million gallons.

5 million $2.50 surplus 3 million

The pie chart to the right illustrates hypothetical data for the market share for the United States automobile market. The percentage of the U.S. market that U.S. auto firms control is

60%

What do economists mean when they use the Latin expression ceteris paribus​?

All else equal.

From the list​ below, select the variable that will cause the demand curve to​ shift:

Consumer income

_________ is the study of the choices people make to attain their​ goals, given their scarce resources.

Economics

What do economists mean by​ scarcity?

Economists mean that unlimited wants exceed limited resources.

In a market​ system, what determines how goods and services will be​ produced?

Firms determine how goods and services will be produced.

What does increasing marginal opportunity costs​ mean?

Increasing the production of a good requires larger and larger decreases in the production of another good.

Your neighbor John has a barking dog. Which of the following statements is​ true?

It can create negative externalities by disrupting your sleep and can also create positive externalities by discouraging intruders.

What are the implications of this idea for the shape of the production possibilities​ frontier?

The production possibilities frontier will be bowed outward.

Identify whether each of the following statements describes a change in supply or a change in the quantity supplied. a. To take advantage of high prices for snow shovels during a very snowy​ winter, Alexander​ Shovels, Inc., decides to increase output. b. The success of​ Apple's iPod leads more firms to begin producing digital music players. c. In the six months following Hurricane​ Katrina, production of oil in the Gulf of Mexico declined by 25 percent.

a change in quantity supplied a change in supply a change in supply

A production possibilities frontier​ (PPF) is

a curve showing the maximum attainable combinations of the two products that may be produced with available resources and current technology

A production possibilities frontier​ (PPF) is

a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.

Productive efficiency means that

a good or service is produced at the lowest possible cost.

The figure to the right illustrates the U.S. market for rugs made in a particular foreign country. Suppose the market price of rugs is ​$750 At a price of ​$750​, there will be ________ of rugs. To reach an equilibrium, the price of the rugs in this market must ______

a shortage rise

A hypothesis in an economic model is . usually about a causal relationship. B. tested before it can be accepted​ (or not​ rejected). C. a statement that may be either correct or incorrect about an economic variable. D. all of the above.

all of the above

Suppose that France is currently producing 1 bottle of wine and 6 pounds of schnitzel and Germany is currently producing 3 bottles of wine and 8 pounds of schnitzel. ​ Then, assume instead that France and Germany specialize by producing only the good for which they have a comparative advantage and then trade 3 bottles of wine for 7 pounds of schnitzel. After specialization and​ trade, France gains by consuming the same amount of wine and ____ additional​ pound(s) of schnitzel ​(enter a numeric response using an​ integer) and Germany gains by consuming the same amount of wine and ____ additional​ pound(s) of schnitzel.

1 5

Below are four supply curve​ diagrams, each of which represents a change in supply LOADING... or a change in quantity supplied LOADING... . a. To take advantage of high prices for snow shovels during a snowy​ winter, Alexander​ Shovels, Inc., decides to increase output. ____ . b. The success of the Apple iPhone leads more firms to begin producing smartphones. ____ . c. In the six months following the Japanese earthquake and tsunami in​ 2011, production of automobiles in Japan declined by 20 percent. ____ .

4 3 1

Economists often are interested in percentage change from one period to the next. The percentage rate of change of gross domestic product​ (GDP) is an important macroeconomic variable. If in 2010 GDP was​ $11,150 billion​ dollars, and GDP increased to ​$11864 billion in 2011, what is the growth rate of the U.S. economy in 2011?

6.4%

The bar graph to the right illustrates hypothetical data for the market share for the United States automobile market. The percentage of the U.S. market that U.S. auto firms control is _____

70%

In your economics​ class, you scored a 66 on the first​ quiz, a 88 on the second​ quiz, and an 78 on the third quiz. Your average quiz grade is ______. ​(Enter your response rounded to one decimal​ place.) On the fourth​ quiz, you scored an _____ Did the fourth quiz raise your​ average? _____

77.3 82 Yes

Your neighbor's consumption point after trade is illustrated by point

D

The diagram to the right represents a demand curve for apples. The original demand curve is D1. If a factor other than price which affects demand​ changes, causing demand to increase​, the resultant demand curve is represented by

D2

Suppose that France and Germany both produce wine and schnitzel. The table below shows combinations of the goods that each country can produce in a day. Who has the comparative advantage in producing wine and who has the comparative advantage in producing​ schnitzel?

France has a comparative advantage producing wine and Germany has a comparative advantage producing schnitzel.

Imagine that the curves shown in the accompanying figure represent two demand curves for traditional wings​ (basket of​ six) at Buffalo Wild Wings. The movement from point Upper AA to Upper BB on Upper D 1D1 is caused by Indicate which of the following could cause a movement from point Upper AA to Upper CC. ​(Check all that​ apply.)

a decrease in the price of baskets of traditional wings a decline in vegetarianism a rise in the number of buyers

An unexpected frost in the orange groves of California would cause

a decrease in the supply of orange​ juice, increasing the equilibrium price.

Which of the following covers the study of topics such as inflation or​ unemployment?

Macroeconomics

Suppose the United Kingdom and Norway both produce oil and fish​ oil, which are sold for the same prices in both countries. The following table shows combinations of both goods that each country can produce in a​ day, measured in thousands of​ barrels, using the same amounts of capital and​ labor: Who has the comparative advantage in producing oil? Can these two countries gain from trading oil and fish​ oil?

Neither country has a comparative advantage producing oil because their opportunity costs of producing oil are equal. These countries cannot gain from trade because neither has a comparative advantage producing either good.

As part of their budget tightening​ process, many states are cutting aid to colleges and​ universities, with students being asked to pick up a bigger part of the escalating tab of higher education. Which of the following would do the most to enable you to cope with those higher expenses without impairing your progress toward a​ degree?

Reducing your consumption of goods and services not essential to your education.

Suppose the United States and Mexico both produce hamburgers and tacos. The combinations of the two goods that each country can produce in one day are presented in the table below. Which country has an absolute advantage in producing​ tacos? Which country has a comparative advantage in producing​ tacos? Suppose the United States is currently producing 100 tons of hamburgers and 30 tons of tacos and Mexico is currently producing 20 tons of hamburgers and 25 tons of tacos. If the United States and Mexico each specialize in producing only one good​ (the good for which each has a comparative​ advantage), then a total of __________ additional​ ton(s) of hamburgers can be produced for the two countries combined ​(enter a numeric response using an​ integer) and a total of ________ additional​ ton(s) of tacos can be produced.

The United States Mexico 30 20

What is comparative​ advantage?

The ability to produce a good or service at a lower opportunity cost than other producers.

What is absolute​ advantage?

The ability to produce more of a good or service than competitors using the same amount of resources.

From the list​ below, select the variable that will cause the supply curve to​ shift:

The cost of raw materials

What happens if a country produces a combination of goods that efficiently uses all of the resources available in the​ economy? Refer to the graph to the right. What is the opportunity cost of moving from point B to point​ C?

The country is operating on its production possibilities frontier. 20 sedans

If demand decreases and supply​ increases, which of the following will definitely​ occur?

The equilibrium price will decrease.

If demand and supply both​ increase, which of the following will definitely​ occur?

The equilibrium quantity will increase.

Choco Fantasy is a firm that produces both dark chocolates as well as liquor chocolates. It can produce​ 10,000 bars of dark chocolate per month if all its resources are used to produce only this variety.​ Similarly, using all its resources in the production of liquor​ chocolates, the firm can produce​ 8,000 bars per month.​ However, during a given​ month, the firm produces both varieties. Which of the​ following, if​ true, would suggest that the firm is operating at a point inside its​ PPF?

The firm believes in maintaining a certain amount of excess capacity to meet unexpected changes in demand.

Suppose the equilibrium price and equilibrium quantity of gold both decreasedecrease. Which of the following would produce such a​ change?

The market demand curve for gold could have decreased

Microsoft charges a price of​ $599 for a copy of Windows 7. Is this pricing decision​ rational?

When we assume the managers at Microsoft have used all available information and have weighed all known benefits and​ costs, we are assuming rationality.

Suppose the economy whose PPF is shown on the right experiences economic growth. ​1.) Use the​ 3-point curved line drawing tool to show how growth affects the​ trade-offs the country faces between producing ships and food. ​2.) Use the point drawing tool to draw and label a point on the new PPF that shows the economy producing more of both goods. Label this point​ 'B'. Carefully follow the instructions above and only draw the required objects. Which of the following may have caused the shift you have​ drawn? ​(Check all that​ apply.)

a larger labor force advances in technology an increase in the capital stock

Economics is a social science because A. it considers human behaviorlong dash—particularly ​decision-making behavior. B. it is based on studying the actions of individuals. C. it applies the scientific method to the study of the interactions among individuals. D. all of the above.

all of the above

Economics is a social science because a. it applies the scientific method of the study of the interactions among individuals b. it considers human behavior- particularly decision-making behavior c. it is based on studying the actions of individuals d. all of the above

all of the above

What is the role of an​ entrepreneur? A. to bring together the factors of productionlong dash—​labor, ​capital, and natural resources B. to operate a business that produces a good or service C. to take risks D. All of the above.

all of the above

When economists speak of a shortageshortage​, they mean a situation in which A. some consumers aresome consumers are unable to makeunable to make a purchase ata purchase at the current price.the current price. B. the quantity demandeddemanded exceeds quantity suppliedsupplied. C. the market price is belowbelow the equilibrium price. D. all of the above. Your answer is correct.E. A and B only.

all of the above

If a market system functions​ well, which of the following is necessary for the enforcement of contracts and property​ rights?

an independent court system

When we graph the relationship between two​ variables, we often want to draw conclusions about whether changes in one variable are causing changes in the other variable. Doing​ so, however, can lead to incorrect conclusions. Reasons for drawing incorrect conclusions about cause and effect include A. an omitted variable. B. reverse causality. C. both a and b. D. none of the above.

both a and b

When we graph the relationship between two​ variables, we often want to draw conclusions about whether changes in one variable are causing changes in the other variable. Doing​ so, however, can lead to incorrect conclusions. Reasons for drawing incorrect conclusions about cause and effect include an omitted variable. B. reverse causality. C. both a and b. .D. none of the above.

both a and b

A market is a group of ______ of a good or service and the institution or arrangement by which they come together to trade.

buyers and sellers

A market is a group of ____________ of a good or service and the institution or arrangement by which they come together to trade.

buyers and sellers

______ ​decide(s) what goods and services will be produced.

consumers, firms, government

Refer to the diagram to the​ right: Use the line drawing tool to draw a demand curve shifting to the leftleft. Label this line ​'D2​'. Carefully follow the instructions​ above, and only draw the required objects With this​ shift, equilibrium price will _________ and equilibrium quantity will _________ .

decrease decrease

Use the line drawing tool to draw a supply line shifting to the rightright. Label this line ​'S2​'. Carefully follow the instructions​ above, and only draw the required object. With this​ shift, equilibrium price will ______ and equilibrium quantity will _____ .

decrease increase

Allocative efficiency means that

every good or service is produced up to the point where marginal benefit is equal to marginal cost.

A free market is a market with​ ________ government restrictions on how a good or service can be produced or sold and with​ ________ government restrictions on how a factor of production can be employed.

few;few

If country ABC can produce a unit of good 1 with fewer resourceswith fewer resources than can country​ XYZ, it is correct to say that country ABC

has an absolute advantage in producing good 1.

Microeconomics is the study of

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

Suppose the price of a substitutesubstitute to LCD televisions risesrises. What effect will this have on the market equilibrium for LCD​ TVs? The equilibrium price of LCD TVs will

increase and the equilibrium quantity will increase

Firms choose how to produce the goods and services they sell. In many​ cases, firms face a​ trade-off between using more workers or using more machines. For​ example,

many times in the past several​ decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines.

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

marginal benefit equals marginal cost.

A firm operating in a market economy has a strong incentive to be productively efficient and allocatively efficient because the former enables it to __________ while the latter ensures it of _______ . If a firm is productively and allocatively​ efficient, it earns _______ ​; if it is​ not, it ______ .

minimize production costs ample revenues profit suffers a loss

A _______ economy is an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.

mixed

The diagram to the right illustrates a demand curve. As with all demand ​curves, this​ curve's slope is

negative

Which of the following is not scarce according to the economic​ definition?' a. gas b. tutorial workers c. time d. workers e. none of the above

none of the above

​"Rent controls, government farm​ programs, and other price ceilings and price floors are​ bad." This is an example of a

normative statement. The statement is concerned with what should be.

In​ economics, the term capital refers to

physical capital, such as machinery, that is used to produce other goods.

_____ is concerned with what is​, and _____ is concerned with what ought to be. Economics is about _____ ​, which measures the costs and benefits of different courses of action.

positive analysis normative analysis positive analysis

__________ occurs when a good or service is produced at the lowest possible cost. __________ occurs when production is in accordance with consumer preferences.

productive efficiency allocative efficiency

Years​ ago, an apple producer argued that the United States should enact a​ tariff, or a​ tax, on imports of bananas. His reasoning was​ that: ​"the enormous imports of cheap bananas into the United States tend to curtail the domestic consumption of fresh fruits produced in the United​ States." ​Source: Quoted in Douglas A.​ Irwin, Peddling​ Protectionism: Smoot-Hawley and the Great​ Depression, Princeton,​ NJ: Princeton University​ Press, 2011, p. 22. This producer apparently assumed apples and bananas to be _______

substitutes

The equilibrium price and quantity of a product was​ $100 and​ 1,000 units per month in 2015 and is​ $150 and 800 units per month in 2016. ​1.) Use the line drawing tool to draw new demand and supply curves illustrating the changes described above. Properly label the lines. ​2.) Use the point drawing tool to plot the 2016 equilibrium. Properly label the point. Carefully follow the instructions​ above, and only draw the required objects From 2015 to​ 2016,

supply decreased more than demand increased.

In the diagram to the​ right, when the price is ​$71 per​ player, the amount of the ____ is _____ million players per month.

surplus 56

In the diagram to the​ right, when demand decreasesdecreases​, ________ develops at the original price. Equilibrium price will ______ and equilibrium quantity will ______ as a new equilibrium is established.

surplus fall fall

The production possibilities frontiers depicted in the diagram to the right illustrate

technological advances in the tank industry.

What is the​ circular-flow diagram and what does it​ illustrate?

the circular-flow diagram shows how households and firms are linked through product and factor markets

Refer to the graph to the right. After the government imposes a price of​ $3.50 in this​ market, area A represents

the consumer surplus transferred to producers.

Macroeconomics​ examines:

the economy as a​ whole, such as how rapidly the economy grows.

Prepping for a​ next-day exam over the course of an evening​ (and possibly into the wee hours of test​ day) poses increasing costs since

the longer you choose to study will result in an increase in the number and value of foregone activities.

According to the law of​ demand,

there is an inverse relationship between price and quantity demanded.

Economics assumes people and​ firms:

use all available information to achieve their goals​, respond to​ incentives, and make decisions by comparing marginal benefits with marginal costs.

Is it possible for a country to have a comparative advantage in producing a good without also having an absolute​ advantage? A country without an absolute advantage in producing a good

will have a comparative advantage if it has a lower opportunity cost of producing that good.

Which of the following shows a positive nonlinearpositive nonlinear ​relationship? ​ (assume values of x greater than 0x>0​)

y= -8+ (square root) of x


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