Micro study questions chapter 1

An increase in population results in an increase in demand

True

If the demand for a product decreases and the supply of the product does not change, equilibrium price and equilibrium quantity will both decrease

True

Hurricane Katrina damaged a large portion of refining and pipeline capacity when it swept through the Gulf coast states in August 2005. As a result of this, many gasoline distributors were not able to maintain normal deliveries. At the pre-hurricane equilibrium price (i.e., at the initial equilibrium price), we would expect to see a shortage of gasoline the quantity demanded equal to the quantity supplied an increase in the demand for gasoline A surplus of gasoline

A

In order to be binding, a price floor - must lie above the free-market equilibrium price. - must lie below the free-market equilibrium price. - must coincide with the free-market equilibrium price. - must be high enough for firms to earn a profit.

A

Prices of smartphones (assume that this is a normal good) have fallen in recent years. Over this same period, the price of the components used to produce smartphones has also fallen and consumer incomes have risen. Which of the following best explains the falling prices of smartphones? - The supply curve for smartphones has shifted to the right more than the demand curve has shifted to the right - The supply curve for smartphones has shifted to the right while the demand curve for smartphones has shifted to the left - The demand curve for smartphones has shifted to the right more than the supply curve has shifted to the right - The demand curve and the supply curve for smartphones have both shifted to the left

A

An increase in the equilibrium price for a product will result - when there is a decrease in supply and an increase in demand for the product - when the quantity of the product demanded exceeds the quantity supplied - when there is an increase in demand and an increase in the number of firms producing the product - when there is a decrease in supply and a decrease in demand for the product

A

Suppose the demand curve for a product is downward sloping and the supply curve is upward sloping. If a unit tax is imposed in the market for this product, - the tax burden will be shared by buyers and sellers - sellers bear the entire burden of the tax - the tax burden will be shared among the government, buyers and sellers - buyers bear the entire burden of the tax.

A

If the government implements a price ceiling on insulin, this will - encourage manufacturers to produce and sell more insulin to increase their profits. - decrease the quantity of insulin the manufacturers will be willing to supply. - increase the price consumers will pay for insulin. - have to be set above the market equilibrium price to be effective.

B

Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying the economic idea that People are rational People respond to economic incentives Optimal decisions are made at the margin Equity is more important than efficiency

B

Every society faces economic trade-offs. This means Some people live better than others do Not everyone can have enough goods to survive Producing more of one good means less of another good can be produced Ssocietys output cannot be made available to all

C

In economics, choices must be made because we live in a world of unemployment greed scarcity unlimited resources

C

The additional cost to a firm of producing one more unit of a good or service is the opportunity cost. total cost. marginal cost. minimum cost.

C

The difference between the ________ for a good and the ________ is called consumer surplus. - highest price a consumer is willing to pay; lowest price a consumer is willing to pay - price the consumer actually pays; actual cost to the producer - highest price a consumer is willing to pay; price the consumer actually pays - lowest price a consumer is willing to pay; price the consumer actually pays

C

The willingness of consumers to buy a product at different prices is shown on a marginal cost curve. production possibilities frontier. demand curve. supply curve.

C

15. Ranchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to increase? An increase in the demand for cattle An increase in the price of sheep An increase in the price of sheep feed A decrease in the price of cattle

D

Which of the following would cause an increase in the supply of cheese? a decrease in the price of wine (assuming that cheese and wine are complements) An increase in the price of cheese an increase the price of a product that producers sell instead of cheese an increase in the number of firms that produce cheese

D

An increase in population results in a decrease in demand

False

If the demand for a product decreases and the supply of the product does not change, equilibrium price and equilibrium quantity will both increase.

False

A consumer is willing to purchase a product up to the point where - the marginal benefit is equal to the price of the product. - the quantity demanded is equal to the quantity supplied. - he spends all of his income. - he is indifferent between consuming and saving.

A

:Scarcity refers to the situation in Which - unlimited wants exceed limited resources. - unlimited resources exceed limited wants. - a country's population is larger than its resource base. - a nation's poverty level increases faster than its population.

A

19. An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in - an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease. - an increase in the equilibrium price of lobster and no change in the equilibrium quantity. - a decrease in the equilibrium quantity of lobster and no change in the equilibrium price. - a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or decrease.

A

4. If a vineyard wants to raise funds to purchase a new bottling machine, it does so in the Factor Market Output market Product market Alcoholic beverages market

A

9. Which of the following is part of an economic model Assumptions Norms Opinions Preferences of economic agents

A

Economists reason that the optimal decision is to continue any activity up to the point where the marginal benefit is zero marginal benefit is greater than the marginal cost marginal benefit equals the marginal cost marginal cost is zero

C

10. Which of the following describes a characteristic of a perfectly competitive market? There are many buyers but few sellers There are many sellers but few buyers There are many buyers and sellers Equilibrium is achieved when demand for the product sold in the market equals the supply

C

13. A change in all of the following variables will change the market demand for a product except Income Population and demographics The price of the product Tastes

C

14. Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are Both luxury goods Both inferior goods Complements Substitutes

C

17. Assume that potatoes are an inferior good. Which of the following would cause both the equilibrium price and equilibrium quantity of potatoes to decrease? A decrease in consumer income A technological advancement that results in a bumper crop of potatoes An increase in consumer income A freeze that sharply reduces potato output

C

6. A ________ demand curve for shampoo would be caused by a change in the price of shampoo Rightward shift of the Leftward shift of the Movement along the Positively sloped

C

A decrease in the price of pork will result in an increase in the supply of pork a larger quantity of pork supplied a smaller quantity of pork supplied a decrease in the demand for pork

C

Buyers will bear the entire burden of a unit tax if the demand curve for a product is horizontal downward sloping vertical upward sloping

C

Compared to prices charged by Uber, traditional taxi companies charge government-regulated prices. These government-regulated prices ________ in the market for shared rides. increase consumer surplus decrease producer surplus decrease consumer surplus decrease deadweight loss

C

18. Producer surplus is defined as - The difference between the highest price consumers are willing to pay for a product and the actual price paid. - The difference between the highest price consumers are willing to pay for a product and the minimum amount producers are willing to accept for that product. - The difference between the price a producer receives for a product and the maximum amount a producer is willing to accept for that product. - The difference between the price a producer receives for a product and the minimum amount a producer is willing to accept for that product.

D

Electric car manufacturers want to sell more electric cars at a higher price. Which of the following events would have this effect? -technological advancement in the production of electric car batteries. -an increase in the number of manufacturers of electric cars. -a decrease in the price of lithium, which is used in the electric car batteries -an increase in the price of gasoline

D

If in the market for bananas the supply curve has shifted to the right, then the quantity of bananas supplied has increased the supply of bananas has decreases the quantity of bananas supplied has decreased the supply of bananas increased

D

If the United States lifts the embargo on Cuban products, what will happen in the U.S. market for Cuban cigars? The demand curve will shift to the left The demand curve will shift to the right The supply curve will shift to the left The supply curve will shift to the right

D

Suppose a drought resulted in a major reduction in the California lettuce crop. In the market for lettuce, - the supply curve shifted to the left resulting in a decrease in the equilibrium price - the demand curve shifted to the left resulting in a decrease in the equilibrium price - the demand curve shifted to the right resulting in an increase in the equilibrium price - the supply curve shifted to the left resulting in an increase in the equilibrium price

D

The slope of a production possibilities frontier measures the ________ of producing one more unit of a good. Marginal Revenue Total Revenue Marginal cost Opportunity Cost

D

There is often a trade off between Productive efficiency and allocative efficiency Limited and unlimited resources Voluntary and involuntary exchanges Economic efficiency and economic equity

D