Microeconomics -> Homework 1-4

- elastic - inelastic b) is defined more narrowly

MIT economist Jerry Hausman has estimated the price elasticity of demand for Post Raisin Bran cereal to be -2.5 and the price elasticity of demand for all types of breakfast cereals to be -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... a) is a smaller share of a consumer's budget b) is defined more narrowly c) has fewer substitutes available d) is more of a necessity e) is consumed over a shorter period of time

economics

_____________ is the study of the choices people make to attain their goals, given their scare resources

- productive efficiency - allocative efficiency

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

b) there will be almost no change in the total revenue after the price increase

a firm sells​ 3,000 headphones at a price of​ $3 per unit. even though this price is slightly higher than competing​ brands, the management is considering a further increase in price by 25 cents. the firm plans to focus advertising efforts on superior sound clarity.​ rachel, the​ firm's marketing​ head, feels confident that a price increase by 25 cents will increase revenue. industry analysts are of the opinion that even though the revenue is likely to​ increase, the firm must be careful of rivals who are actively competing for higher market share the firm increased the price of headphones to​ $3.25 and anticipated a decline in quantity demanded by only 100 units.​ however, the firm was able to sell only​ 2,769 headphones at this new price. which of the following is most strongly implied by this​ information? a) this firm has the highest share in the market for headphones b) there will be almost no change in the total revenue after the price increase c) the demand for headphones is highly elastic d) the market for headphones is going through a downturn e) the demand curve for headphones in general is vertical

d) 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

a free market exists... a) when the government places significant restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed b) only in fiction. there are no markets or economies which even come close to approaching the status of a free market c) when the government places absolutely no restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed d) 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

buyers and sellers

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

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

a production possibilities frontier (PPF) is... a) a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology b) a curve that illustrates the demand of two goods for the average consumer c) a curve showing the generally attainable combinations of two products that may be produced with all planned or potential, yet undeveloped technology d) a curve that shows the potential productive capabilities of the frontier (defined as the area outside of cities) of a developing economy

d) shows the maximum attainable combinations of two goods that may be produced with available resources

a production possibilities frontier... a) shows the act of buying and selling b) shows the market for a good or service c) shows how participants in the market are linked d) shows the maximum attainable combinations of two goods that may be produced with available resources e) shows how unlimited wants exceed the limit resources available to fulfill those wants

(1) shift right (2) shift left a) the new demand curve intersects the new supply curve (3) are not a) the quantity of coffee sold can increase if the supply curve shifts to the right

according to a news article on​ bloomberg.com, the demand for coffee is increasing as​ "millennials' seemingly unquenchable thirst for coffee is helping to push global demand to a​ record." at the same​ time, coffee crops in Brazil and Asia have been hampered by dry weather and droughts. the article notes that​ "consumption is rising as supplies are getting​ tighter" in the market for​ coffee, the effect of the growth in millennial demand for coffee is the demand curve will (1) _________ __________ in the market for​ coffee, the effect of dry weather and droughts on coffee crops is the supply curve will (2) __________ __________ the new market equilibrium will be where... a) the new demand curve intersects the new supply curve b) the new demand curve intersects the original supply curve c) the original demand curve intersects the new supply curve d) the new demand curve intersects the original demand curve the article contains a chart showing changes in worldwide sales of coffee from 2006 through 2016. the chart is​ labeled, "World demand has expanded in the past​ decade" data on the quantity of coffee sold and data on the demand for coffee #3 -> (*are* or *are not*) the same thing. If the demand for coffee has not​ changed, then... a) the quantity of coffee sold can increase if the supply curve shifts to the right b) the quantity of coffee sold can increase if the demand curve does not shift c) the quantity of coffee sold cannot increase d) the quantity of coffee sold can increase if the supply curve shifts to the left

c) shift the soybean supply curve to the right - decreasing - increasing

according to an article in the Wall Street Journal, a decline in demand for ethanol, which is made from corn, has reduced the demand for corn. many U.S. farmers can use the same acreage to grow either corn or soybeans a decline in the demand for corn will... a) shift the soybean demand curve to the right b) shift the soybean demand curve to the left c) shift the soybean supply curve to the right d) shift the soybean supply curve to the left this will result in the equilibrium price of soybeans _________________ and the equilibrium quantity _________________

b) when the price of a good increases, consumers' purchasing power decreases, and they cannot buy as much of the good as they did prior to the price change

according to the *law of demand*, there is an inverse relationship between price and quantity demanded. that is, the demand curve for goods and services slopes downward. why? a) when the price of a good increases, consumers purchase complementary goods that are now relatively less expensive b) when the price of a good increases, consumers' purchasing power decreases, and they cannot buy as much of the good as they did prior to the price change c) when price increases, demand decreases d) when price of a good increases, consumers' purchasing power increases, and they can buy more of the good than they did prior to the price change

a) there is an inverse relationship between price and quantity demanded

according to the law of demand, a) there is an inverse relationship between price and quantity demanded b) when the price of a product falls, quantity demanded will decrease c) when the price of a product increases, quantity demanded will increase d) all of the above

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

allocative efficiency means that... a) every good or service is distributed fairly b) a good or service is produced at the lowest possible cost c) every good or service is produced up to the point where marginal benefit is equal to marginal cost d) a good or service is produced as quickly as possible

- government - households and firms

centrally planned economies allocate resources based on decisions by __________________, while market economies answer these questions through decisions made by ___________________ and ________________

c) shift out along both axes - of both goods

consider a production possibilities frontier (PPF) that shows the trade-off between the production of cotton (on the y-axis) and the production of soybeans (on the x-axis) what effect would improved fertilizers have on the initial production possibilities frontier? if fertilizers improve, then the PPF will... a) shift out along the soybean axis b) remain changed c) shift out along both axes d) shift out along the cotton axis this will indicate that more ____ ________ ________ can be produced

e) estimate price elasticity of demand by experimenting with different prices

consider firms that introduce new products, such as DVDs in 2001. when firms introduce new products, how do they typically determine the price elasticity of demand for those products? firms with new products often... a) approximate price elasticity of demand with market signals such as surpluses b) identity price elasticity of demand by asking for government assistance c) guess price elasticity of demand based on market competition d) identify price elasticity of demand by using price controls to set price floors e) estimate price elasticity of demand by experimenting with different prices

(1) shift in (2) right (3) increases (4) increase

consider the market for the Nissan Xterra suppose the price of metal, which is an input in automobile production, decreases when the price of an input changes, this results in a (1) __________ _____ the supply curve in particular, if the price of metal decreases, then the Nissan Xterra supply curve will shift to the (2) _________ when the price of metal decreases, the quantity of Nissan Xterras supplied at any particular Xterra price (3) _______________ instead, consider the future price of Xterras. if Nissan believes the future price of Xterras will be lower, then Nissan may (4) ______________ supply today

d) the marginal benefit from the activity is equal to the marginal cost

economists believe that an activity should be continued up to the point where... a) the marginal benefit from the activity is greater than the marginal cost b) the marginal benefit from the activity is less than the marginal cost c) the marginal benefit from the activity plus the marginal cost equals zero d) the marginal benefit from the activity is equal to the marginal cost

b) marginal benefit equals marginal cost

economists use the word *marginal* to mean an extra or additional benefit or cost of a decision. an optimal decision occurs when... a) marginal benefit is greater than marginal cost b) marginal benefit equals marginal cost c) marginal cost is zero d) marginal benefit is maximized

$1,000,000

every society faces trade-offs because we live in a world of scarcity. Suppose a student-athlete has the opportunity to earn $1,000,000 next year playing for a minor league baseball team, $100,000 next year playing for a European professional football team, or $0 returning to college for another year. The opportunity cost of the student-athlete returning to college next year is *what*

c) the percentage change in the quantity demanded divided by the percentage change in price

how is the price elasticity of demand measured? the price of demand is measured as... a) price divided by the quantity demanded b) the percentage change in the quantity demanded divided by the percentage change in the quantity supplied c) the percentage change in the quantity demanded divided by the percentage change in price d) the change in price divided by the change in the quantity demanded e) the slope of the demand curve

b) factors of production

in economic terminology, the inputs used to make goods and services are referred to as... a) durables and nondurables b) factors of production c) real output d) intangibles

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

in economics, the terms capital refers to... a) physical capital, such as machinery, that is used to produce other goods b) the different between a firm's assets and its liabilities c) financial resources used by businesses to hire resources d) the process of raising funds from venture capitalists

a) all else equal

in general, the term "*ceteris paribus*" means... a) all else equal b) holding everything else variable c) unsettled mathematical paradigms d) both A and B

c) income flows to households through factor markets

in the circular-flow diagram showing how a market system works, a) firms and households are both suppliers in product markets b) households purchase output produced by firms in product and factor markets c) income flows to households through factor markets d) income flows to firms and the government through factor markets e) households are demanders and firms are suppliers in factor markets

c) the study of the economy as a whole, including topics such as inflation, unemployed, and economic growth

macroeconomics is... a) the study of "large" (greater than $100,000) economic transactions in the economy b) the study of firms as a group with special emphasis on how these firms interact with one another c) the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth d) the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices

c) both supply and demand

market price is determined by... a) supply only b) demand only c) both supply and demand d) neither supply nor demand

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

microeconomics is the study of... a) "small" (less than $100,000) economic transactions in the economy b) firms as individual units excluding how these firms interact with one another c) how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices d) the economy as a whole, including topics such as inflation, unemployment, and economic growth

c) scarcity

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... a) the market b) rationality c) scarcity d) economics

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

opportunity cost is... a) when consumers and firms use all available information as they act to achieve ether goals b) when unlimited wants exceed the limited resources available to fulfill those wants c) the highest valued alternative that must be given up to engage in an activity d) the idea that because of scarcity, producing more of one good or service means producing less or another good or service

d) a good or service is produced at the lowest possible cost

productive efficiency means that... a) every good or service is produced up to the point where marginal benefit is equal to marginal cost b) every good or service is distributed fairly c) a good or service is produced as quickly as possible d) a good or service is produced at the lowest possible cost

- centrally planned - market

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.

a) decrease the quantity of Wendy's hamburgers demanded by a relatively large amount

suppose Wendy's hamburgers have many close substitutes available if​ so, then an increase in the price of Wendy's hamburgers will likely... a) decrease the quantity of Wendy's hamburgers demanded by a relatively large amount b) increase the quantity of Wendy's hamburgers demanded by a relatively small amount c) decrease the quantity of Wendy's hamburgers demanded by a relatively smallamount d) increase the quantity of Wendy's hamburgers demanded by a relatively large amount e) not change the quantity of Wendy's hamburgers demanded

- elastic - elastic

suppose the *price elasticity of demand* for cereal is -1.02 if so, then the demand for cereal is _____________ in another example, assume the price elasticity of demand for a particular magazine is -1.78 the demand for the magazine is _____________

inelastic

suppose the owner of a Dollar General store raises the price of the merchandise in her store. in turn, total revenue at her store increases by 5 percent the demand for the store's merchandise is ______________

c) shift outward along the consumption good axis - consumption goods

suppose we can divide all the goods produced by an economy into two types: consumption goods and capital goods. capital goods, such as machinery, equipment, and computers, are goods used to produce other goods suppose a technological advance occurs that affects the production of consumption goods but not capital goods if a technological advance occurs that affects the production of consumption goods but not capital goods, then the production possibilities frontier will... a) shift outward along the capital goods axis b) remain unchanged c) shift outward along the consumption goods axis d) shift outward along both axis the new production possibilities frontier will indicate that with the technological advance, more ___________________ _________ can be produced

d) substitute goods are used for the same purposes while complementary goods are used together

the distinction between substitutes and complements is... a) when income increases, demand for a substitute good increases while demand for a complementary good falls b) substitute goods are used together while complementary goods are used for the same purposes c) when income increases, demand for a complementary good decreases while demand for a substitute good increases d) substitute goods are used for the same purpose while complementary goods are used together

d) product markets are markets for goods, while factors markets are markets for factors of production - labor, capital, natural resources, and entrepreneurial ability

the primary difference between product markets and factor markets is that... a) product markets are generally after factor markets in the distribution chain b) product markets produce goods for final sale while the output of factor markets is included in the purchase price of the good itself - factors are not sold c) product markets are markets for factors of production - labor, capital, natural resources, and entrepreneurial ability, while factor markets are markets for goods and services d) product markets are markets for goods, while factor markets are markets for factors of production - labor, capital, natural resources, and entrepreneurial ability

b) if technological advances occur

the production possibilities frontier will shift outward... a) if resources are not used to product capital goods b) if technological advances occur c) if resources are used to produce consumption goods d) if production occurs outside the production possibilities frontier e) if resources are not used in production

b) what goods will be produced, how will they be produced, and who will receive the goods?

the three economic questions that every society must answer are... a) what kind of government will the society have, how will it be fun, and who will run it? b) what goods will be produced, how will they be produced, and who will receive the goods? c) what economic system will be used, how will it be implemented, and who will make market decisions? d) what are the prices of goods, how are they determined, and who will pay for them?

c) with points on the production possibilities frontier

we can show economic efficiency... a) with points inside and on the production possibilities frontier b) with points outside the production possibilities frontier c) with points on the production possibilities frontier d) with points inside the production possibilities frontier e) with points on and outside the production possibilities frontier

c) with points inside the production possibilities frontier

we can show economic inefficiency... a) with points on and outside the production possibilities frontier b) with points inside and on the production possibilities frontier c) with points inside the production possibilities frontier d) with points on the production possibilities frontier e) with points outside the production possibilities frontier

b) extra or additional

what do economists mean by the word "marginal"? a) first b) extra or additional c) unimportant d) small

straight line - up and down

what does a perfectly inelastic line look like on a graph

b) the demand curve for a product

what information must economists have to estimate the price elasticity of demand? to estimate the price elasticity of demand, economists need to know... a) the change in price b) the demand curve for a product c) total revenue d) the supply curve for a product e) the market price and quantity sold

a shift in the demand curve

when the price of a related good changes, this will result in a _________ ___ _____ ______________ ___________