Microeconomics 251

How do you derive a market supply curve from individual supply curves?

Add up quantities supplied by all individual producers for each price

Which of the following is not a key element of the scientific method?

Designing data

What are the two major ways in which an economy can grow and push out its production possibilities curve?

Increases in resource supplies and advances in technology.

Which of the following characteristics leads to a upward-sloping supply curve?.

Increasing opportunity costs Increasing marginal costs

What are the major functions of the entrepreneur?

Innovate Take risks Make decisions

With these curves, the optimal allocation of resources to a particular product will occur when

MB = MC

Why is money not considered to be a capital resource in economics?

Money is not considered a capital resource because money is not productive

What are the determinants of supply?

Price of other goods Technology Resource prices Number of producers

In a command economy scarce goods are allocated by

a government-appointed planning board based on the board's long-term priorities.

How (if at all) do each of the following events affect the location of a country's production possibilities curve? a.The quality of education increases: b. The number of unemployed workers increases: c. A new technique improves the efficiency of extracting copper from ore: d. A devastating earthquake destroys numerous production facilities:

a. Curve shifts outward b. No Change c.Curve shifts outward. d.Curve shifts inward

Indicate whether each of the following statements applies to microeconomics or macroeconomics: a. The unemployment rate in the United States was 8.1 percent in August 2012: b. A U.S. software firm discharged 15 workers last month and transferred the work to India: c. An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise d. U.S. output, adjusted for inflation, decreased by 2.4 percent in 2009: e. Last week Wells Fargo Bank lowered its interest rate on business loans by one-half of 1 percentage point: f. The consumer price index rose by 3.8 percent from August 2011 to August 2012:

a. Macroeconomics b. Microeconomics c. Microeconomics d.Macroeconomics e. Microeconomics f.Macroeconomics

In the circular flow model 2

businesses sell goods and buy labor; households buy goods and sell labor.

The scientific method is the technique used by economists to determine

economic principles

Barter requires that you

find a person who has what you want and a person who needs what you have to offer.

Suppose a city block was going to be used for a parking lot. The opportunity cost would be

greater in New York City because the alternative uses of the block are more valuable.

The use of capital in the production process

improves efficiency, increases output, and provides for growth

The emergence of the MP3 (iPod) technology is an example of "creative destruction" because

it has replaced compact discs as a technology used for the storage and transfer of music.

The market system depends on private property ownership and the protection of private property rights to

provide an incentive to maintain property and allow for the orderly transfer of property ownership.

The use of money

provides a common value that makes buying and selling transactions simpler than would be the case with barter.

In the circular flow model there is a flow of

real goods and services and a flow of money.

In the circular flow model

resource markets provide for the exchange of labor and product markets provide for the exchange of goods and services.

"Division of labor" means that workers

specialize in tasks that take advantage of their individual abilities and skills

Some large hardware stores such as Home Depot boast of carrying as many as 20,000 different products in each store. This volume of goods is the result of

the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to maximize profits.

Suppose that you initially have $100 to spend on books or movie tickets. The books start off costing $25 each and the movie tickets start off costing $10 each. For each of the following situations, would the attainable set of combinations that you can afford increase or decrease? a. Your budget increases from $100 to $150 while the prices stay the same: b. Your budget remains $100, the price of books remains $25, but the price of movie tickets rises to $20: c. Your budget remains $100, the price of movie tickets remains $10, but the price of a book falls to $15:

A. increase B. decrease C. increase

Which statement is consistent with the law of supply?

An increase in market price will lead to an increase in quantity supplied.

Why is entrepreneurial ability distinct from labor even though both are considered as a category of economic resource?

Because entreprenuerial ability is not directly engaged in production

True or False: Money must be issued by a government for people to accept it.

False

If current output is such that marginal cost exceeds marginal benefit, should more or fewer resources be allocated to this product?

Fewer

Which of the following best describes the concept of utility and economic behavior

Satisfaction from consuming goods or services.

Suppose that, on the basis of a nation's production possibilities curve, an economy must sacrifice 10,000 pizzas domestically to get the 1 additional industrial robot it desires, but that it can get the robot from another country in exchange for 9,000 pizzas. Now consider the following statement: "Through international specialization and trade, a nation can reduce its opportunity cost of obtaining goods and thus 'move outside its production possibilities curve.'" Which of the following explains the relationship between the situation described and the statement?

Specialization and trade have the same effect as having more and better resources or discovering improved production techniques.

In which of these two statements are the terms "supply" and "demand" used correctly? A. "In the corn market, demand often exceeds supply and supply sometimes exceeds demand." B. "The price of corn rises and falls in response to changes in supply and demand."

Statement B.

Specify the typical shapes of marginal-benefit and marginal-cost curves.

The marginal benefit curve is downward correct sloping. The marginal cost curve is upward correct sloping.

Refer to the table below. Fill in the surplus-shortage column (gray cells). a. What is the equilibrium price in this market? At what price is there neither a shortage nor a surplus? b. How big is the surplus or shortage at $3.40? c.How big a surplus or shortage results if the price is 60 cents higher than the equilibrium price? d.How big a surplus or shortage results if the price is 30 cents lower than the equilibrium price?

Thousands of Bushels Demanded Price per Bushel Thousands of Bushels Supplied Surplus (+) or Shortage (-) 88 $3.40 65 -23 81 3.70 71 -10 75 4.00 75 0 70 4.30 78 +8 66 4.60 80 +14 63 4.90 81 +18 A. $4.00, $4.00 b. There is a shortage correct of 23 correct thousand bushels. What if the price is $4.90? There is a surplus correct of 18 correct thousand bushels. c.14 correct thousand bushels. d.10 correct thousand bushels.

How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity increase or decrease, or are the answers indeterminate because they depend on the magnitudes of the shifts? a. Supply decreases and demand is constant. b. Demand decreases and supply is constant. c. Supply increases and demand is constant. d. Demand increases and supply increases. e. Demand increases and supply is constant. f. Supply increases and demand decreases. g. Demand increases and supply decreases h. Demand decreases and supply decreases.

a. Price: Increases Quantity Decreases b. Price: Decreases Quantity: Decreases c. Price: Decreases Quantity: Increases d. Quantity: Increases e. Quantity: Increases f. Price: Decreases g. Price: Increases h. Quantity: Decreases

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500?

a. Small automobiles become more fashionable: Increase correct. b. The price of large automobiles rises (with the price of small autos remaining the same): Increase correct. c. Income declines and small autos are an inferior good: Increase correct. d. Consumers anticipate that the price of small autos will greatly come down in the near future: Decrease correct.

In 2001 an outbreak of hoof-and-mouth disease in Europe led to the burning of millions of cattle carcasses. What impact do you think this had on the following?

a. The supply of cattle hides: decrease correct b. Hide prices: increase correct c. The supply of leather goods: decrease correct d. The price of leather goods: increase correct eBook & Resources Changes in Supply, Demand, and Equilibrium

Indicate whether a change in the value of each of the following determinants of supply leads to a movement along the supply curve or a shift in the supply curve.

i. Change in market price: Movement along the supply curve correct ii. Change in factor productivity: A shift in the supply curve correct v. Change in technology: A shift in the supply curve correct vi. Change in resource prices: A shift in the supply curve correct vii. Change in taxes: A shift in the supply curve correct A change from point A to point B = A change in quantity supplied correct A change from point A to point C = A change in supply correct

In market economies, firms rarely worry about the availability of inputs to produce their products, whereas in command economies input availability is a constant concern because

in market economies, buyers of inputs know that sellers want to earn profits.

The phrase "invisible hand" means that

market prices provide information to consumers regarding products they wish to purchase, and to producers regarding products they wish to produce.

In a market system scarce goods are allocated through the operation of 2

market prices that are determined by consumers and producers acting in their own self-interest.

Consider the statement: "We want money only to part with it." When people express a desire to 'have money,' they really want

the goods and services that money can buy.

When an economy relies on specialization,

trade enables individuals to obtain the goods in which they do not have a specialization.

In a market system scarce goods are allocated through the operation of

what must be sacrificed in using a resource for its next best use.