microeconomics midterm practice questions

barter

entails the exchange of goods for goods

the price elasticity of demand is 2.25

f a firm can sell 3,000 units of product A at $10 per unit and 5,000 at $8, then: A) the price elasticity of demand is 0.44. B) A is a complementary good. C) the price elasticity of demand is 2.25. D) A is an inferior good.

a and b are complementary goods

f the demand curve for product B shifts to the right as the price of product A declines, then a) both A and B are inferior goods. b) A is a superior good and B is an inferior good. c) A is an inferior good and B is a superior good. d) A and B are complementary goods.

1.80 0.56 1

Use the midpoint formula and points a and b to calculate the elasticity of demand for that range of the demand curve: Elasticity of demand for D1 (points a to b in the left diagram above) = Elasticity of demand for D2 (points c to d in the right diagram above) = do the same for the demand curve for the figure above: elasticity of demand for D3 (points e and f in the diagram above)

Percentage change in quantity supplied/percentage change in price

What is the formula for measuring the price elasticity of supply? a) Percentage change in quantity supplied/percentage change in price b) Percentage change in quantity demanded/percentage change in price c) Percentage change in quantity demanded/percentage change in income d) Percentage change in quantity supplied/percentage change in income

look for and pursue opportunities to increase their utility

When economists say that people act rationally in their self-interest, they mean that individuals: a) look for and pursue opportunities to increase their utility. b) generally disregard the interests of others. c) are mainly creatures of habit. d) are usually impulsive and unpredictable.

an increase in price will increase total reveune

When the percentage change in price is greater than the resulting percentage change in quantity demanded, a) a decrease in price will increase total revenue. b) demand may be either elastic or inelastic. c) an increase in price will increase total revenue. d) demand is elastic.

+ - 0

marginal utility can be: a) positive, but not negative. b) positive or negative, but not zero. c) positive, negative, or zero. d) decreasing, but not negative.

3.00 1.40 0.71 0.33

moving from 5 to 4: 4 to 3 3 to 2 2 to 1

lower price increases the real incomes of buyers, enabling them to buy more

one reason that the quantity demanded of a good increases when its price falls is that the -price decline shifts the supply curve to the left. -lower price shifts the demand curve to the left. -lower price shifts the demand curve to the right. -lower price increases the real incomes of buyers, enabling them to buy more.`

canada

out of canada, cuba, north korea, and belarus, which best exhibits the characteristic of a market economy

government should not interfere with the operation of the economy.

the term "_______-______" suggests that: a) land and other natural resources should be privately owned, but capital should be publicly owned. b) land and other natural resources should be publicly owned, but capital should be privately owned. c) government should not interfere with the operation of the economy. c) government action is absolutely necessary if the economy is to achieve full employment and full production.

choices that are made in seeking the best use of resources

they study of economics is primarily concerned with a) keeping private businesses from losing money. b) demonstrating that capitalistic economies are superior to socialistic economies. c) choices that are made in seeking the best use of resources. d) determining the most equitable distribution of society's output.

law of diminishing marginal utility

this data illustrates a) law of comparative advantage. b) utility-maximizing rule. c) law of diminishing marginal utility d) law of increasing opportunity costs.

summing the marginal utilities of each unit consumed.

total utility may be determined by: a) multiplying the marginal utility of the last unit consumed by the number of units consumed. b) summing the marginal utilities of each unit consumed. c) multiplying the marginal utility of the last unit consumed by product price. d) multiplying the marginal utility of the first unit consumed by the number of units consumed.

opportunity costs

trade-offs relates to the idea of ______ _____

satisfaction that a consumer derives from a good or service.

utility refers to the a) satisfaction that a consumer derives from a good or service. b) rate of decline in a product demand curve. c) relative scarcity of a product. d) usefulness of a product.

price increases quantity intermediate

what happens to price and quantity if: demand increases and supply decreases

price intermediate quantity decreases

what happens to price and quantity if: demand decreases and supply decreases

price and quantity decreases

what happens to price and quantity if: demand decreases and supply is constant

price: intermediate quantity: increases

what happens to price and quantity if: demand increases and supply increases

price and quantity increases

what happens to price and quantity if: demand increases and supply is constant

price: increases quantity: decrease

what happens to price and quantity if: supply decreases and demand is constant

price decreases demand intermediate

what happens to price and quantity if: supply increases and demand decreased

price decreases quantity increases

what happens to price and quantity if: supply increases and demand is constant

there is no such thing as a free lunch

what idea bests states the idea of opportunity cost best? "A penny saved is a penny earned." "He who hesitates is lost." "There is no such thing as a free lunch." "All that glitters is not gold."

the substitution effect

when the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls and fewer adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls? a) the substitution effect b) the income effect c) an increase in the demand for Nike soccer balls d) the price effect

income effect

when the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes the: a) an inferior good. b) the rationing function of prices. c) the substitution effect. d) the income effect.

income effect

when the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the a) cost effect b) inflationary effect c) income effect d) substitution effect

substitution effect

when the price of a product rises, consumers with a given money income shift their purchases to other products whose prices are now relatively lower. This statement describes the a) an inferior good b) the rationing function of prices c) the substitution effect d) the income effect

0

where total utility is at a maximum, marginal utility is: a) negative b) + and increasing c) zero d) + but decreasing

theory

which of the following terms implies the *greatest* degree of confidence in an economic generalization? a) hypothesis b) theory c) principle d) law

hypothesis

which of the following terms implies the *least* degree of confidence in an economic generalization? a) hypothesis b) theory c) principle d) law

most decisions involve changes from the present situation

why does economics involve marginal analysis? a) most decisions involve changes from the present situation b) marginal benefits always exceed marginal costs. c) marginal costs always exceed marginal benefits. d) much economic behavior is irrational.

indicates the quantity demanded at each price in a series of prices

A demand curve a) shows the relationship between price and quantity supplied. b) indicates the quantity demanded at each price in a series of prices c) graphs as an upsloping line. d) shows the relationship between income and spending.

the division of output is decided by central planning rather than by individuals operating freely through markets

A fundamental difference between the command system and laissez-faire capitalism is that, in command systems, a) the division of output is decided by central planning rather than by individuals operating freely through markets. b) all economic decisions are made by the government, whereas there is no government in laissez-faire capitalism. c) scarcity does not exist, whereas it does in laissez-faire capitalism. d) money is not used, whereas it is in laissez-faire capitalism.

demand is elastic at relatively high prices

For a linear demand curve, a) elasticity is constant along the curve. b) elasticity is unity at every point on the curve. c) demand is elastic at relatively low prices. d) demand is elastic at relatively high prices.

elastic increase

Danny "Dimes" Donahue is a neighborhood's 9-year-old entrepreneur. His most recent venture is selling homemade brownies that he bakes himself. At a price of $1.50 each, he sells 100. At a price of $1.00 each, he sells 300. a. Is demand elastic or inelastic over this price range? If demand had the same elasticity for a price decline from $1.00 to $0.50 as it does for the decline from $1.50 to $1.00, would cutting the price from $1.00 to $0.50 increase or decrease Danny's total revenue?

pleasure or satisfaction

For economists, the word "utility" means: a) versatility and flexibility. b) rationality. c) pleasure or satisfaction d) purposefulness.

reallocate resources from less-desired to more-desired uses

From society's point of view, the economic function of profits and losses is to a) promote the equal distribution of real assets and wealth. b) achieve full employment and price level stability. c) contribute to a more equal distribution of income. d) reallocate resources from less-desired to more-desired uses.

the horizontal sum of individual demand curves

Graphically, the market demand curve is a) steeper than any individual demand curve that is part of it. b) greater than the sum of the individual demand curves. c) the horizontal sum of individual demand curves. d) the vertical sum of individual demand curves.

people weigh costs and benefits to make decisions

Purposeful behavior means that a) people are selfish in their decision making. b) people weigh costs and benefits to make decisions c) people are immune from emotions affecting their decisions. d) decision makers do not make mistakes when weighing costs and benefits.

individuals may make different choices because of different desired outcomes

Purposeful behavior suggests that a) everyone will make identical choices. b) resource availability exceeds economic wants. c) individuals may make different choices because of different desired outcomes. d) an individual's economic goals cannot involve trade-offs.

permits the production of a larger output with fixed amounts of resources.

Specialization in production is economically beneficial primarily because it a) allows everyone to have a job that he or she likes. b) permits the production of a larger output with fixed amounts of resources.Correct c) facilitates trade by bartering. d) guarantees full employment.

results in greater total output

Specialization in production is important primarily because it: a) results in greater total output. b) allows society to avoid the coincidence-of-wants problem. c) allows society to trade by barter. d) allows society to have fewer capital goods.

all of the means identified in the other answers

Specialization—the division of labor—enhances productivity and efficiency by a) allowing workers to take advantage of existing differences in their abilities and skills. b) avoiding the time loss involved in shifting from one production task to another. c) allowing workers to develop skills by working on one, or a limited number, of tasks. d) all of the means identified in the other answers

marginal utility obtained from the last dollar spent on each product is the same

To maximize utility, a consumer should allocate money income so that the: a) elasticity of demand on all products purchased is the same. b) marginal utility obtained from the last dollar spent on each product is the same. c) total utility derived from each product consumed is the same. d) marginal utility of the last unit of each product consumed is the same.

is P = 35 - .5Q.

(Advanced analysis) The equation for the demand curve in the below diagram: a) is P = 70 - Q. b) is P = 35 - 2Q. c) is P = 35 - .5Q.Correct d) cannot be determined from the information given.

-1 decreases

. What can you conclude about the relationship between the slope of the demand curve above and its elasticity? The demand curve has a constant slope of ___ and elasticity _____ as we move down the curve.

more inelastic the demand for the product

A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the a) more elastic the supply curve. b) larger the elasticity of demand coefficient. c) more elastic the demand for the product. d) more inelastic the demand for the product.

is an institution that brings together buyers and sellers

A market a) reflects upsloping demand and downsloping supply curves. b) entails the exchange of goods, but not services. c) is an institution that brings together buyers and sellers. d) always requires face-to-face contact between buyer and seller.

graphs as a line parallel to the vertical axis

A perfectly inelastic demand curve a) has a price elasticity coefficient greater than unity. b) has a price elasticity coefficient of unity throughout. c) graphs as a line parallel to the vertical axis. d) graphs as a line parallel to the horizontal axis.

can be represented by a line parallel to the vertical axis

A perfectly inelastic demand schedule a) rises upward and to the right but has a constant slope. b) can be represented by a line parallel to the vertical axis. c) cannot be shown on a two-dimensional graph. d) can be represented by a line parallel to the horizontal axis.

benefit exceeds its marginal cost

A person should consume more of something when its marginal a) benefit exceeds its marginal cost. b) cost exceeds its marginal benefit. c) cost equals its marginal benefit. d) benefit is still better.

satisfies consumer wants

A product has utility if it a) takes more and more resources to produce successive units of it. b) violates the law of demand. c) satisfies consumer wants.Correct d) is useful.

beer and marijuana are complementary goods

A recent study found that an increase in the federal tax on beer (which would increase the price of beer) would reduce the demand for marijuana. Based on this information we can conclude that a) beer and marijuana are substitute goods. b) beer and marijuana are complementary goods c) beer is an inferior good. d) marijuana is an inferior good.

consumer preferences have changed in favor of A so that they now want to buy more at each possible price.

A shift to the right in the demand curve for product A can be most reasonably explained by saying that -consumer incomes have declined, and consumers now want to buy less of A at each possible price. -the price of A has increased and, as a result, consumers want to purchase less of it. -consumer preferences have changed in favor of A so that they now want to buy more at each possible price. -the price of A has declined and, as a result, consumers want to purchase more of it.

principle

A well-tested economic theory is often called a a) a hypothesis b) a prototype c) a principle d) an anomaly

productive resources are limited

According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because: a) people are greedy. b) productive resources are limited. c) human beings are inherently insecure. d) people are irrational

is a reality that underlies economic behavior

According to economists, economic self-interest a) is a reality that underlies economic behavior b) has the same meaning as selfishness. c) means that people never make wrong decisions. d) is usually self-defeating.

the marginal benefit of additional units of the good now outweigh the marginal cost

According to the concept of diminishing marginal utility, consumers will purchase more of a good when the price falls because -substitutes are relatively more expensive. -consumers' real income has increased. -the marginal benefit of additional units of the good now outweigh the marginal cost the good is now perceived as having higher quality.

rational self-interest because he is attempting to increase his own income by identifying and satisfying someone else's wants

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as a) rational self-interest because he is attempting to increase his own income by identifying and satisfying someone else's wants. b) greedy because he is asking for a high wage that some of his neighbors can't afford to pay. c) selfish because he is asking for a wage that is higher than others might charge. d) irrational because some neighbors refused his offer.

is a possible explanation of cause and effect

An economic hypothesis a) has the same meaning as an economic principle or economic law. b) is usually a normative statement. c) is a possible explanation of cause and effect d) is a stronger generalization than an economic law.

is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem

An economic system a) requires a grouping of private markets linked to one another. b) is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem. c) requires some sort of centralized authority (such as government) to coordinate economic activity. d) is a plan or scheme that allows a firm to make money at some other firm's expense.

bicycles are normal goods

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that: a) there are many goods that are substitutes for bicycles. b) there are many goods that are complementary to bicycles. c) there are few goods that are substitutes for bicycles. d) bicycles are normal goods.

increase the number of strawberry pickers needed by farmers

An increase in consumer desire for strawberries is most likely to a) increase the number of strawberry pickers needed by farmers. b) reduce the supply of strawberries. c) reduce the number of people willing to pick strawberries. d) reduce the need for strawberry pickers.

consumers will substitute other products for the one whose price has risen

An increase in the price of a product will reduce the amount of it purchased because -the higher price will signal to consumers that the good is of low quality. -the higher price means that real incomes have risen. -consumers will substitute other products for the one whose price has risen. -consumers substitute relatively high-priced for relatively low-priced products.`

constant throughout

Answer the question on the basis of the following demand schedule. price: 6 quantity demanded: 1 price: 5 quantity demanded: 2 price: 4 quantity demanded: 3 price: 3 quantity demanded: 4 price: 2 quantity demanded: 5 price: 1 quantity demanded: 6 if the demand schedule were graphed, we would find that the slope is: a) its slope diminishes as we move southeast down the curve. b) its slope diminishes as we move northwest up the curve. c) its slope is constant throughout.Correct d) the data are inconsistent with the law of demand.

in the $6-$4 price range

Answer the question on the basis of the following demand schedule. price: 6 quantity demanded: 1 price: 5 quantity demanded: 2 price: 4 quantity demanded: 3 price: 3 quantity demanded: 4 price: 2 quantity demanded: 5 price: 1 quantity demanded: 6 the price elasticity of demand is relatively elastic: a) in the $6-$4 price range.t b) over the entire $6-$1 price range. c) in the $3-$1 price range. d) in the $6-$5 price range only.

in the $3-$1 price range

Answer the question on the basis of the following demand schedule. price: 6 quantity demanded: 1 price: 5 quantity demanded: 2 price: 4 quantity demanded: 3 price: 3 quantity demanded: 4 price: 2 quantity demanded: 5 price: 1 quantity demanded: 6 the price elasticity of demand is relatively inelastic: a) in the $6-$4 price range.t b) over the entire $6-$1 price range. c) in the $3-$1 price range. d) in the $6-$5 price range only.

in the $4-$3 price range only

Answer the question on the basis of the following demand schedule. price: 6 quantity demanded: 1 price: 5 quantity demanded: 2 price: 4 quantity demanded: 3 price: 3 quantity demanded: 4 price: 2 quantity demanded: 5 price: 1 quantity demanded: 6 the price elasticity of demand is utility: a) throughout the entire price range. because the slope of the demand curve is constant b) over the entire $6-$1 price range. c) in the $3-$1 price range. d) in the $4-$3 price range only.

Although the slope of the demand curve is constant, price elasticity declines as we move from high to low price ranges

Answer the question on the basis of the following demand schedule. price: 6 quantity demanded: 1 price: 5 quantity demanded: 2 price: 4 quantity demanded: 3 price: 3 quantity demanded: 4 price: 2 quantity demanded: 5 price: 1 quantity demanded: 6 which of the following is correct? -Although the slope of the demand curve is constant, price elasticity declines as we move from high to low price ranges. -Although the slope of the demand curve is constant, price elasticity increases as we move from high to low price ranges. -Although the demand curve is convex to the origin, price elasticity of demand is constant throughout. -A steep slope means demand is inelastic; a flat slope means demand is elastic.

4 units of J and 5 units of K

Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K. If the consumer has money income of $52 and the prices of J and K are $8 and $4 respectively, the consumer will maximize her utility by purchasing: a) 2 units of J and 7 units of K. b) 5 units of J and 5 units of K. c) 4 units of J and 5 units of K d) 6 units of J and 3 units of K.

2 units of J and 3 units of K

Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K. if the consumer's money income were cut from $52 to $28, and the prices of J and K remain at $8 and $4, respectively, she would maximize her satisfaction by purchasing: a) 3 units of J and 3 units of K. b) 1 unit of J and 3 units of K. c) 4 units of J and 1 unit of K. d) 2 units of J and 3 units of K

276 units

Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K. what level of total utility is realized from the equilibrium combination of J and K, if the consumer has a money income of $52 and the prices of J and K are $8 and $4, respectively? a) 156 utils b) 124 utils c) 276 utils d) 36 utils

a decline in income if X is an inferior good

Assume the demand curve for product X shifts to the right. This might be caused by a) a decline in income if X is an inferior good. b) a decline in the price of Z if X and Z are substitute goods. c) a change in consumer tastes that is unfavorable to X. d) an increase in the price of Y if X and Y are complementary goods.

more of B and less of A

Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa = 5 and MUb/Pb = 8. Ben should purchase: a) more of A and less of B. b) more of B and less of A. c) more of both A and B. d) less of both A and B.

complementary

Blu-ray players and Blu-ray discs are _______ goods

independently acting buyers and sellers and freedom to enter or leave markets

Broadly defined, competition involves a) private property and freedom of expression. b) independently acting buyers and sellers and freedom to enter or leave markets c) increasing opportunity costs and diminishing marginal utility. d) capital goods and division of labor.

inferior

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are _____ goods

there are independently acting buyers and sellers in each market

Competition means that a) sellers can manipulate market price by causing product scarcities. b) there are independently acting buyers and sellers in each market.Correct c) a product can be purchased at a number of different prices. d) there is more than one seller in a market.

purposeful behavior

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. What is this a reflection of? a) resource scarcity and the necessity of choice. b) purposeful behavior. c) marginal costs that exceed marginal benefits. d) the trade-off problem that exists between competing goals.

are essential to the reallocation of resources from less desired to more desired goods

Economic profits and losses a) are both considered by economists to be a part of production costs. b) are essential to the reallocation of resources from less desired to more desired goods. c) have no influence on the composition of domestic output. d) equalize the distribution of income in the long run.

should be larger to better satisfy consumers' desire for the product.

Economic profits in an industry suggest the industry a) can earn more profits by increasing product price. b) should be larger to better satisfy consumers' desire for the product. c) has excess production capacity. d) is the size that consumers want it to be.

who owns the factors of production and the methods used to coordinate economic activity

Economic systems differ according to which two main characteristics? a) who owns the factors of production and the methods used to coordinate economic activity b) the technology used in production and the quantity and quality of natural resources c) how goods are produced and who gets them d) the political system in place and the degree of scarcity facing the economy

are generalizations based on hypotheses tested and supported with observed facts

Economic theories a) are useless because they are not based on laboratory experimentation. b) that are true for individual economic units are never true for the economy as a whole. c) are generalizations based on hypotheses tested and supported with observed facts. d) are abstractions and therefore of no application to real situations.

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

Economics may best be defined as the a) interaction between macro and micro considerations. b) social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity. c) empirical testing of value judgments through the use of logic. d) study of why people are rational.

implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. this fact a) is an example of irrational behavior. b) implies that electronic media sources are displacing print sources for many consumers. c) contradicts the economic perspective. d) implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.

a) point a b) ppc2 c) point b d) ppc3

Households in China save 40 percent of their annual incomes each year, whereas U.S. households save less than 5 percent. At the same time, production possibilities are growing at roughly 9 percent per year in China but only about 3.5 percent in the United States. Use the graphical analysis of "present goods" versus "future goods" to explain the difference between China's growth rate and the U.S. growth rate. a) Which point, A or B, best represents the combination of present and future goods in the United States? b) Which production possibilities curve best represents future growth in the United States? c) Which point, A or B, best represents the combination of present and future goods in China? d) Which production possibilities curve best represents future growth in China?

demand curve for X to the right

If X is a normal good, a rise in money income will shift the a) supply curve for X to the left. b) supply curve for X to the right. c) demand curve for X to the left. d) demand curve for X to the right

demand curve for Z to the left

If Z is an inferior good, an increase in money income will shift the a) supply curve for Z to the left. b) supply curve for Z to the right. c) demand curve for Z to the left. d) demand curve for Z to the right.

a decrease in the quantity of resources employed in industry X

If consumer desire for product X increases, all of the following will occur except a) an increase in the profits of industry X. b) an increase in the quantity of resources employed by industry X. c) an increase in the output of industry X. d) a decrease in the quantity of resources employed in industry X.

increase the amount demanded by more than 10 percent

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will a) decrease the amount demanded by more than 10 percent. b) increase the amount demanded by more than 10 percent. c) decrease the amount demanded by less than 10 percent. d) increase the amount demanded by less than 10 percent.

increase the quantity of X demanded by less than 4 percent

If the demand for product X is inelastic, a 4 percent decrease in the price of X will A) decrease the quantity of X demanded by more than 4 percent. B) decrease the quantity of X demanded by less than 4 percent. C) increase the quantity of X demanded by more than 4 percent. D) increase the quantity of X demanded by less than 4 percent.

increase the quantity demanded by 25%

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will: A) increase the quantity demanded by about 2.5 percent. B) decrease the quantity demanded by about 2.5 percent. C) increase the quantity demanded by about 25 percent.Correct D) increase the quantity demanded by about 250 percent.

demand is more price elastic

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then a) demand is price elastic.Correct b) demand is price inelastic. c) demand is unit elastic with respect to price. d) not enough information is given to make a statement about elasticity.

increase the marginal utility of the last unit consumed of this good

If the price of product X rises, then the resulting decline in the amount purchased will -necessarily increase the consumer's total utility from his total purchases. -increase the marginal utility of the last unit consumed of this good -increase the total utility from purchases of this good. -reduce the marginal utility of the last unit consumed of this good.

a decrease in the price of one will increase the demand for the other.

If two goods are complements, -they are consumed independently. -an increase in the price of one will increase the demand for the other. -a decrease in the price of one will increase the demand for the other. -they are necessarily inferior goods.

substitute goods, and the higher price for oil increased the demand for natural gas

In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are -complementary goods, and the higher price for oil increased the demand for natural gas. -substitute goods, and the higher price for oil increased the demand for natural gas. -complementary goods, and the higher price for oil decreased the supply of natural gas. -substitute goods, and the higher price for oil decreased the supply of natural gas.

make simplifying assumptions

In constructing models, economists a) make simplifying assumptions. b) include all available information. c) must use mathematical equations. d) attempt to duplicate the real world.

utility

In economics, the pleasure, happiness, or satisfaction received from a product is called: a) marginal cost b) rational outcome c) status fulfillment d) utility

a change i buyer tastes

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by: a) an increase in the cost of making donuts. b) an increase in the price of coffee. c) consumers expecting donut prices to fall. d) a change in buyer tastes.

a) 3 b) 2

Janice really likes potatoes. Potatoes cost $1 per pound, and she has $5.00 that she could possibly spend on potatoes or other items. Suppose she feels that the first pound of potatoes is worth $1.50, the second pound is worth $1.14, the third pound is worth $1.05, and all subsequent pounds are worth $0.30. a) how many pounds of potatoes will she purchase? b) what is she only had to spend $2?

opportunity cost

Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of what? a) opportunity cost b) marginal benefits that exceed marginal costs c) imperfect information d) normative economics

decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile

Kara was out jogging and, despite being tired, decided to run one more mile. Based on her actions, economists would conclude that Kara a) must be an avid runner. b) decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile. c) decided that the marginal cost of running one more mile would outweigh the benefit of the additional mile. d) was not very tired, so the marginal cost of the extra mile was very low.

a) down b) increase

Look at the figure below. Suppose that the cost of cheese falls, so that the marginal cost of producing pizza decreases. a) will the mc curve shift up or down? b) will the optimal amount of pizza increase or decrease?

change in total utility obtained by consuming one more unit of a good.

Marginal utility is the a) sensitivity of consumer purchases of a good to changes in the price of that good. b) change in total utility obtained by consuming one more unit of a good. c) change in total utility obtained by consuming another unit of a good divided by the change in the price of that good. d) total utility associated with the consumption of a certain number of units of a good divided by the number of units consumed.

assume many buyers and many sellers of a standardized product

Markets, viewed from the perspective of the supply and demand model, -assume many buyers and many sellers of a standardized product -assume market power so that buyers and sellers bargain with one another. -do not exist in the real-world economy. -are approximated by markets in which a single seller determines price.

assume many buyers and many sellers of a standardized product

Markets, viewed from the perspective of the supply and demand model, a) assume many buyers and many sellers of a standardized product b) assume market power so that buyers and sellers bargain with one another. c) do not exist in the real-world economy. d) are approximated by markets in which a single seller determines price.

-

Mary says, "You would have to pay me $50 to attend that pro wrestling event." For Mary, the marginal utility of the event is: a) 0 b) positive but declines rapidly c) negative d) positive, but less than the ticket price

no coincidence of wants exists between any two states

Michigan: Has surplus of Autos and wants lettuce. Texas: Has surplus of Autos and wants apples. Washington: Has surplus of apples and wants autos. On the basis of the information, it can be said that:

money to flow counter-clockwise from michigan to texas to washington

Michigan: Has surplus of Autos and wants lettuce. Texas: Has surplus of Autos and wants apples. Washington: Has surplus of apples and wants autos. given the information, and assuming trade occurs between the three states, we can expect

washington to exchange apples with texas and receive money in return

Michigan: Has surplus of Autos and wants lettuce. Texas: Has surplus of Autos and wants apples. Washington: Has surplus of apples and wants autos. on the basis of the information, and assuming trade occurs between the three states, we can expect

from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small

Most demand curves are relatively elastic in the upper-left portion because the original price -and quantity from which the percentage changes in price and quantity are calculated are both large. -and quantity from which the percentage changes in price and quantity are calculated are both small. -from which the percentage price change is calculated is small and the original quantity from which the percentage change in quantity is calculated is large. -from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small.

Mrs. Arnold should spend more on soda and less on pretzels

Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are $0.60 per bottle and $0.40 per bag, respectively. It can be concluded that a) the two commodities are substitute goods. b) Mrs. Arnold should spend more on pretzels and less on soda. c) Mrs. Arnold should spend more on soda and less on pretzels. d) Mrs. Arnold is buying soda and pretzels in the utility-maximizing amounts.

more than the previous one

Once Mylie's total utility begins to decrease, does each additional singing of the song hurt more than the previous one or less than the previous one?

the decision to engage in one activity means forgoing some other activity

Opportunity costs exist because a) the decision to engage in one activity means forgoing some other activity. b)wants are scarce relative to resources. c) households and businesses make rational decisions. d) most decisions do not involve sacrifices or trade-offs.

the development of a low-cost electric automobile

Other things equal, which of the following might shift the demand curve for gasoline to the left? -the discovery of vast new oil reserves in Montana -the development of a low-cost electric automobile -an increase in the price of train and air transportation -a large decline in the price of automobiles

4 hours

Pham can work as many or as few hours as she wants at the college bookstore for $9 per hour. But due to her hectic schedule, she has just 15 hours per week that she can spend working at either the bookstore or other potential jobs. One potential job, at a café, will pay her $12 per hour for up to 6 hours per week. She has another job offer at a garage that will pay her $10 an hour for up to 5 hours per week. And she has a potential job at a daycare center that will pay her $8.50 per hour for as many hours as she can work. If her goal is to maximize the amount of money she can make each week, how many hours will she work at the bookstore?

encourages owners to maintain or improve their property so as to preserve or enhance value.

Private property a) discourages cooperation because people don't want to part with what they own. b) discourages innovation, as people are often afraid to risk losing their own property. c) encourages owners to maintain or improve their property so as to preserve or enhance value. d) does everything indicated by the other answers.

encourage cooperation by improving the chances of mutually agreeable transactions.

Property rights are important because they a) ensure an equal distribution of income. b) encourage cooperation by improving the chances of mutually agreeable transactions. c) guarantee that any exchange will make all parties better off than prior to the exchange. d) allow the government to control how resources are allocated.

fourth unit

Refer to data. Marginal utility becomes negative beginning with the: a) first unit. b) second unit. c) third unit. d) fourth unit.

20

Refer to the data. The value for W is? a) 15 b) 20 c) 25 d) 30

15

Refer to the data. The value for X is: a) 15 b) 5 c) 55 d) 10

-5

Refer to the data. The value for Z is? a) -5 b) +5 c) -10 d) zero

decrease if demand were D2 only

Refer to the diagram and assume a single good. If the price of the good decreases from $6.30 to $5.70, consumer expenditure would: a) decrease if demand were D1 only. b) decrease if demand were D2 only. c) decrease if demand were either D1 or D2. d) increase if demand were either D1 or D2.

D1 is more elastic than D2.

Refer to the diagram. Between prices of $5.70 and $6.30: a) D1 is more elastic than D2. b) D2 is an inferior good and D1 is a normal good. c) D1 and D2 have identical elasticities. d) D2 is more elastic than D1.

independent

Running shoes and staplers are ______ goods

demand will become less price elastic.

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week, a) demand will become more price elastic. b) price elasticity of demand will not change as price is lowered. c) demand will become less price elastic d) the elasticity of supply will increase.

soap business

Suppose Natasha currently makes $50,000 per year working as a manager at a cable TV company. She then develops two possible entrepreneurial business opportunities. In one, she will quit her job to start an organic soap company. In the other, she will try to develop an Internet-based competitor to the local cable company. For the soap-making opportunity, she anticipates annual revenue of $465,000 and costs for the necessary land, labor, and capital of $395,000 per year. For the Internet opportunity, she anticipates costs for land, labor, and capital of $3,250,000 per year as compared to revenues of $3,275,000 per year. What opportunity should she pursue?

all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant

Suppose an economist says that "other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that a) the quantity of bananas purchased determines the price of bananas. b) all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant. c) everyone will buy more bananas when the price falls. d) one cannot generalize about the relationship between the price of bananas and the quantity purchased.

more of x and/or less of y

Suppose that MUx/Px exceeds MUy/Py. To maximize utility, the consumer who is spending all her money income should buy: a) less of X only if its price rises. b) more of Y only if its price rises. c) more of Y and/or less of X. d) more of X and/or less of Y.

should buy less B and more A

Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $2 and $4, respectively. The marginal utility of the last units of A and B are 16 and 24, respectively. These data suggest that Ms. Thomson: a) has preferences that are at odds with the principle of diminishing marginal utility. b) considers A and B to be complementary goods. c) should buy less A and more B. d) should buy less B and more A.

10

Suppose that Omar's marginal utility for cups of coffee is constant at 1.5 utils per cup no matter how many cups he drinks. On the other hand, his marginal utility per doughnut is 10 for the first doughnut he eats, 9 for the second he eats, 8 for the third he eats, and so on (that is, declining by 1 util per additional doughnut). In addition, suppose that coffee costs $1 per cup, doughnuts cost $1 each, and Omar has a budget that he can spend only on doughnuts, coffee, or both How big would that budget have to be before he would spend a dollar buying a first cup of coffee?

opportunity cost

Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This example illustrates: a) distorted priorities. b) opportunity costs. c) increasing opportunity costs. d) productive efficiency.

b) -0.50 c) -0.30 d) kwame e) kwame

Suppose that you are on a desert island and possess exactly 20 coconuts. Your neighbor, Friday, is a fisherman, and he is willing to trade 2 fish for every 1 coconut that you are willing to give him. Another neighbor, Kwame, is also a fisherman, and he is willing to trade 3 fish for every 1 coconut. b) what is the slope of the budget line from trading with friday? c) what is the slope of the budget line from trading with kwame? d) which budget line features a larger set of attainable combinations of coconuts and fish? (the budget line from trading with kwame/friday?) e) if you are going to trade coconuts for fish, would you rather trade with friday or kwame?

change in demand

Suppose there are three buyers of candy in a market: Tex, Dex, and Rex. The market demand and the individual demands of Tex, Dex, and Rex are shown below. Suppose that at a price of $6, the total quantity demanded increases from 19 to 38. Is this a "change in the quantity demanded" or a "change in demand"?

their marginal utilities are the same

Suppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that a) their marginal utilities are the same. b) their total utilities are the same. c) their marginal and total utilities are proportionate. d) the income and substitution effects associated with each are equal.

for exchange to occur, each seller must have a product that some buyer wants

The "coincidence of wants" problem associated with barter refers to the fact that: a) for exchange to occur, each seller must have a product that some buyer wants. b) money must be used as a medium of exchange or trade will never occur. c) specialization is restricted by the size or scope of a market. d) buyers in resource markets and sellers in product markets can never engage in exchange.

other things equal

The Latin term "ceteris paribus" means

all production involves the use of scare resources and this the sacrifice of alternative goods

The assertion that "there is no free lunch" means that: a) there are always trade-offs between economic goals. b) all production involves the use of scarce resources and thus the sacrifice of alternative goods c) marginal analysis is used in economic reasoning. d) choices need not be made if behavior is rational.

the sensitivity of consumer purchases to price changes

The concept of price elasticity of demand measures a) the slope of the demand curve. b) the number of buyers in a market. c) the extent to which the demand curve shifts as the result of a price decline. d) the sensitivity of consumer purchases to price changes.

consumers are largely unresponsive to a per unit price change

The demand for a product is inelastic with respect to price if -consumers are largely unresponsive to a per unit price change. -the elasticity coefficient is greater than 1. -a drop in price is accompanied by a decrease in the quantity demanded. -a drop in price is accompanied by an increase in the quantity demanded.

normal

The demand for most products varies directly with changes in consumer incomes. Such products are known as _____ goods

over range P1P2, price elasticity of demand is greater for D1 than for D2.

The diagram shows two product demand curves. On the basis of this diagram, we can say that: a) over range P1P2, price elasticity of demand is greater for D1 than for D2. b) over range P1P2, price elasticity of demand is greater for D2 than for D1. c) over range P1P2, price elasticity is the same for the two demand curves. d) not enough information is given to compare price elasticities.

workers specialize in various production tasks

The division of labor means that a) labor markets are geographically segmented. b) unskilled workers outnumber skilled workers. c) workers specialize in various production tasks. d) each worker performs a large number of tasks.

a comparison of marginal benefits and marginal costs in decision making

The economic perspective entails a) irrational behavior by individuals and institutions. b) a comparison of marginal benefits and marginal costs in decision making c) short-term but not long-term thinking. d) rejection of the scientific method.

a decrease in supply

The figure below shows the supply curve for tennis balls, S1, for Drop Volley Tennis, a producer of tennis equipment. If production costs were to increase, the quantities supplied at each price would be as shown by the third column of the table ("S2 Quantity Supplied") Did the increase in production costs cause a "decrease in supply" or a "decrease in quantity supplied"?

smaller the resulting price change for an increase in supply

The larger the coefficient of price elasticity of demand for a product, the -larger the resulting price change for an increase in supply. -more rapid the rate at which the marginal utility of that product diminishes. -less competitive will be the industry supplying that product. -smaller the resulting price change for an increase in supply.

price and quantity demanded are inversely related

The law of demand states that, other things equal, a) price and quantity demanded are inversely related. b) the larger the number of buyers in a market, the lower will be product price. c) price and quantity demanded are directly related. d) consumers will buy more of a product at high prices than at low prices.

demand curves slope downward

The law of diminishing marginal utility explains why a) supply curves slope upward. b) demand curves slope downward. c) addicts can never get enough. d) people will only consume their favorite goods and not try new things.

beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer

The law of diminishing marginal utility states that -total utility is maximized when consumers obtain the same amount of utility per unit of each product consumed. -beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer -price must be lowered to induce firms to supply more of a product. -it will take larger and larger amounts of resources beyond some point to produce successive units of a product.

beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer

The law of diminishing marginal utility states that a) total utility is maximized when consumers obtain the same amount of utility per unit of each product consumed. b) beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer. c) price must be lowered to induce firms to supply more of a product. d) it will take larger and larger amounts of resources beyond some point to produce successive units of a product.

competition

The main mechanism that regulates the market system is a) self-interest. b) private property. c) competition. d) freedom of enterprise and choice.

there is an active role for government, even in a market system

The presence of market failures implies that a) money is not an effective tool for exchange in a market system. b) there is an active role for government, even in a market system. c) individuals and firms should strive to be self-sufficient rather than specialize. d) command systems are superior to market systems in the allocation of resources.

decrease by approximately 12 percent.

The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to a) increase by approximately 12 percent. b) decrease by approximately 12 percent. c) decrease by approximately 32 percent. d) decrease by approximately 26 percent.

20 percent reduction in price

The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a : a) 1 percent reduction in price. b) 12 percent reduction in price. c) 20 percent reduction in price. d) 40 percent reduction in price.

negative, but the minus sign is ignored.

The price elasticity of demand is generally a) negative, but the minus sign is ignored. b) positive, but the plus sign is ignored. c) positive for normal goods and negative for inferior goods. d) positive because price and quantity demanded are inversely related.

elastic in high-price ranges and inelastic in low-price ranges

The price elasticity of demand of a straight-line demand curve is -elastic in high-price ranges and inelastic in low-price ranges -elastic but does not change at various points on the curve. -inelastic but does not change at various points on the curve. -1 at all points on the curve.

is elastic

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range a) has declined b) is of unit elasticity c) is inelastic d) is elastic

scientific method

The process by which economists test hypotheses against facts to develop theories, principles, and models is called the a) the economic perspective b) the scientific method c) policy economics d) microeconomics

direct inverse

The relationship between quantity supplied and price is _____, and the relationship between quantity demanded and price is _____. a) direct; inverse b) inverse; direct c) inverse; inverse d) direct; direct

used by economists and other social scientists, as well as by physical scientists and life scientists, to formulate and test hypotheses

The scientific method is a) not applicable to economics because economics deals with human beings. b) also known as the economic perspective. c) employed to form hypotheses out of existing laws and theories. d) used by economists and other social scientists, as well as by physical scientists and life scientists, to formulate and test hypotheses.

a number of relevant variables are assumed to be constant

The term "other things equal" means that a) the associated statement is normative. b) many variables affect the variable under consideration. c) a number of relevant variables are assumed to be constant. d) when variable X increases, so does related variable Y.

consumers behave rationally, attempting to maximize their satisfaction.

The theory of consumer behavior assumes that: a) consumers behave rationally, attempting to maximize their satisfaction. b) consumers have unlimited money incomes. c) consumers do not know how much marginal utility they obtain from successive units of various products. d) marginal utility is constant.

it promotes specialization by overcoming the problems with barter

The use of money contributes to economic efficiency because: a) governmental direction of the production and distribution of output can be avoided by using money. b) roundabout production could not occur without the availability of money. c) it is necessary for the creation of capital goods. d) it promotes specialization by overcoming the problems with barter.

is the satisfaction or pleasure one gets from consuming it

The utility of a good or service a) is synonymous with usefulness. b) is the satisfaction or pleasure one gets from consuming it. c) is easy to quantify. d) rarely varies from person to person.

the widespread of money

Which of the following characteristics is least unique to a market system? a) private ownership of property resources b) competition among buyers and sellers pursuing monetary returns c) the widespread use of money d) freedom of enterprise and choice

although they are generalizations, economic laws are useful because they allow us to predict and therefore influence or adjust to events

Which of the following is a correct statement? a) Economic concepts or laws that are valid during recessions are necessarily valid during prosperity. b) Although they are generalizations, economic laws are useful because they allow us to predict and therefore influence or adjust to events c) Economists use the scientific method. Therefore, economic laws are as quantitatively precise as the laws of physics or chemistry. d) Because economics is primarily concerned with questions of "ought," it is a branch of applied ethics and not scientific.

central planning

Which of the following is a distinguishing feature of a command system? a) private ownership of all capital b) central planning c) heavy reliance on markets d) widespread dispersion of economic power

minimal government intervention

Which of the following is a distinguishing feature of laissez-faire capitalism? a) public ownership of all capital b) central planning c) minimal government intervention d) a circular flow of goods, resources, and money

property rights

Which of the following is a fundamental characteristic of the market system? a) property rights b) central planning by government c) unselfish behavior d) government-set wages and prices

if marginal utility is diminishing and is a positive amount, total utility will increase.

Which of the following is correct? -There is no firm mathematical relationship between marginal utility and total utility. -Total utility is equal to the change in marginal utility from consuming an additional unit of a product. -If marginal utility is diminishing and is a positive amount, total utility will increase. -If marginal utility is diminishing, total utility must also be diminishing.

used clothing

Which of the following is most likely to be an inferior good? -gold watches -ocean cruises -used clothing -steak

government ownership of most property resources

Which of the following is not a typical characteristic of a market system? a) private property b) freedom of enterprise c) government ownership of most property resources d) competition in product and resource markets

Total revenue increases if price is increased

Which of the following is not characteristic of the demand for a commodity that is elastic? -The relative change in quantity demanded is greater than the relative change in price. -Buyers are relatively sensitive to price changes. -Total revenue increases if price is increased. -The elasticity coefficient is greater than one.

what good and services will be produced?

Which of the following is one of the Five Fundamental Questions? a) Which products will be in scarce supply and which in excess supply? b) Who should appoint the head of the central bank? c) How much should society save? d) What goods and services will be produced?

Utility is difficult to measure quantitatively

Which of the following statements about utility is true? a) It is the same as usefulness. b) Total utility diminishes as soon as additional units of a good are consumed. c) Utility is objectively determined, meaning a good should provide the same satisfaction to whomever consumes it. d) Utility is difficult to measure quantitatively.

An increase in the price of C will decrease the demand for complementary product D

Which of the following statements is correct? -An increase in the price of C will decrease the demand for complementary product D. -A decrease in income will decrease the demand for an inferior good. -An increase in income will reduce the demand for a normal good. -A decline in the price of X will increase the demand for substitute product Y.

an increase in money income if A is an inferior good

Which of the following will cause the demand curve for product A to shift to the left? -population growth that causes an expansion in the number of persons consuming A -an increase in money income if A is a normal good -a decrease in the price of complementary product C -an increase in money income if A is an inferior good

a change in the price of product K

Which of the following will not cause the demand for product K to change? -a change in the price of close-substitute product J -an increase in incomes of buyers of product K -a change in the price of product K -a change in consumer tastes for product K

a reduction in the price of cattle feed

Which of the following would not shift the demand curve for beef? -a widely publicized study that indicates beef consumption increases one's cholesterol -a reduction in the price of cattle feed -an effective advertising campaign by pork producers -a change in the incomes of beef consumers

alex may have to lower the price to convince Kara to buy a second slice.

While eating at Alex's "Pizza by the Slice" restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed and would only receive 5 units of satisfaction from consuming a second slice, at the same price. Based on this information, we can conclude that: a) Alex may have to lower the price to convince Kara to buy a second slice b) Kara will not eat a second slice, even if it is given to her at no charge. c) Kara will definitely want to buy a second slice of pizza. d) even if Kara buys a second slice, she will not buy a third slice.

800 760 40 yes toward

With current technology, suppose a firm is producing 400 loaves of banana bread daily. Also assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 7 units of land, 2 units of capital, and 1 unit of entrepreneurial ability, selling at prices of $40, $60, $60, and $20, respectively. Assume the firm can sell these 400 loaves at $2 per unit. total revenue? total cost? profit of ___ will they continue making bread? will resources flow toward or awat?

if the marginal benefit of the movie exceeds its marginal cost

You should decide to go to a movie: A. if the marginal cost of the movie exceeds its marginal benefit. B. if the marginal benefit of the movie exceeds its marginal cost. C. if your income will allow you to buy a ticket. D. because movies are enjoyable.

MUa/Pa = MUb/Pb = MUc/Pc = . . . = MUn/Pn

a consumer is maximizing her utility with a particular money income when: a) the total utility derived from each product consumed is the same. b) MUa/Pa = MUb/Pb = MUc/Pc = . . . = MUn/Pn. c) MUa = MUb = MUc = . . . = MUn. d) Pa = Pb = Pc = . . . = Pn.

perfectly elastic

a demand curve that is parallel to the horizontal axis is: a) perfectly inelastic b) perfectly elastic. c) relatively inelastic. d) relatively elastic

perfectly elastic

a firm can sell as much as it wants at a constant price. Demand is thus: a) perfectly inelastic b) perfectly elastic. c) relatively inelastic. d) relatively elastic

economists use the term "demand" to refer to

a schedule of various combinations of market prices and amounts/quantities demanded.

10 billion 100 billion

a. Suppose that businesses buy a total of $100 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $60 billion in wages, $10 billion in rent, and $20 billion in interest, how much are households paid for providing entrepreneurial ability? b. If households spend $55 billion on goods and $45 billion on services, how much in revenues do businesses receive in the product market?

18 billion 140 billion

a. Suppose that businesses buy a total of $140 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $76 billion in wages, $18 billion in rent, and $28 billion in interest, how much are households paid for providing entrepreneurial ability? b. If households spend $75 billion on goods and $65 billion on services, how much in revenues do businesses receive in the product market?

technique 2 technique 2 technique 2 0 technique 3 no

a. What technique will you want to use if the price of a bar of soap falls to $4.25? b. What if the price of a bar of soap rises to $5.75? c. What if the price of a bar of soap rises to $6.75? d. How many bars of soap will you want to produce if the price of a bar of soap falls to $1.60? e. Suppose that the price of soap is again $4.50 per bar but that the prices of all four resources are now $1.7 per unit. Which is now the least-profitable technique? f. If the resource prices return to their original levels (the ones shown in the table), but a new technique is invented that can produce 2 bars of soap using 1 unit of each of the four resources, will firms prefer the new technique?

freedom of enterprise

allows businesses, within broad limits, to choose what goods to produce

1.91 elastic

b. Suppose the price of apples goes up from $20 to $22 a box. In direct response, Goldsboro Farms supplies 1,200 boxes of apples instead of 1,000 boxes. Compute the coefficient of price elasticity (midpoints approach) for Goldsboro's supply. Instructions: Round your answer to 2 decimal places. c. Is its supply elastic, or is it inelastic?

diminishing marginal utility

because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand? a) diminishing marginal utility b) the rationing function of prices c) the substitution effect d) the income effect

Communism

command systems are also known as

purposeful

economists contend that most economic decisions are a) random b) chaotic c) spontaneous d) purposeful

cuba north korea

give two examples of command economies

copyrights trademarks

give two examples of property rights

ID4 IM 3I DMI MMD

graphs increase decrease

supply will shift right (down) for public and demand will shift left (down) for private

how will an increase in state subsidies to public colleges affect the market for public and private colleges

the good is being produced at a point where marginal benefit exceeds marginal cost

if a firm produces too little of a particular good, this would suggest that a) rational choice cannot be applied to many economic decisions. b) the good is being produced at a point where marginal costs exceed marginal benefits. c) government should intervene to produce more of the good. d) the good is being produced at a point where marginal benefit exceeds marginal cost.

contract as resources move away from industry Y

if competitive industry Y is incurring substantial losses, output will: a) expand as resources move toward industry Y. b) contract as resources move toward industry Y. c) contract as resources move away from industry Y. d) expand as resources move away from industry Y.

expand in industry Z, as more resources will move to that industry

if competitive industry Z is making substantial economic profit, output will: a) fall in industry Z and firms will likely leave the market. b) fall in all industries except industry Z. c) expand in industry Z, as more resources will move to that industry. d) expand in industry Z, but no new firms will enter the market.

greater than 1

if demand for a product is elastic, the value of the price elasticity coefficient is: a) 0 b) greater than one c) equal to one d) less than one

perfectly elastic

if quantity demanded is completely unresponsive to price changes, demand is a) perfectly inelastic b) perfectly elastic. c) relatively inelastic. d) relatively elastic

shift to the right

if the price of product L increases, the demand curve for close-substitute product J will a) shift downward toward the horizontal axis b) shift to the left c) shift to the right d) remain unchanged

is positive, but may be either increasing or decreasing

if total utility is increasing, marginal utility a) is positive but may be either increasing or decreasing. b) must also be increasing. c) may be either positive or negative. d) will be increasing at an increasing rate.

do all of the things mentioned in the other answers

in a market economy, a significant change in consumers' desire for product X will a) alter the profits or losses received by suppliers of product X. b) cause a reallocation of scarce resources. c) cause some industries to expand and others to contract. d) do all of the things mentioned in the other answers.

scarcity and opportunity cost

in deciding whether to study for an economics quiz or go to a concert, one is confirmed by the idea(s) of: a) scarcity and opportunity costs. b) money and real capital. c) complementary economic goals. d) full production.

$4-$3

in which price range of the accompanying demand schedule is demand elastic? price: 4 quantity demanded: 2 price: 3 quantity demanded: 4 price: 2 quantity demanded: 6 price: 1 quantity demanded: 8 a) 4-3$ b) 3-2$ c) 2-1$ d) below 1$

utility of a good or service

is the satisfaction or pleasure one gets from consuming it

use the observed date to form a hypothesis about ice cream buying behavior

kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from day to day. For a couple of weeks, she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the scientific method to better understand ice cream buying habits, her next step is to a) conclude definitively that people buy more ice cream when the temperature rises. b) state her findings as a well-tested economic principle. c) use the observed data to form a hypothesis about ice cream buying behavior. d) throw out the data if it does not show a perfect relationship between buying habits and the other information she has collected.

45

refer to the data. The value for Y is: a) 25 b) 30 c) 40 d) 45

1.2

refer to the diagram and assume a single good. If the price of the good increased from $5.70 to $6.30 along D1, the price elasticity of demand along this portion of the demand curve would be a) 0.8 b) 1.0 c) 1.2 d) 2.0

4

refer to the diagram. The marginal utility of the third unit of X is -5 -4 -2 -15

17

refer to the diagram. The total utility yielded by 4 units of X is -4 -15 -17 -18

6

refer to the diagram. Total utility is at a maximum at _____ units of X. -2 -3 -4 -6

becomes negative after consuming 4 units of output.

refer to the diagram. marginal utility A) increases at an increasing rate. b) becomes negative after consuming 4 units of output c) is found by dividing total utility by the number of units purchased. d) cannot be calculated from the total utility information.a

increases at a diminishing rate, reaches a maximum, and then declines

refer to the diagram. total utility: a) increases so long as additional units of Y are purchased. b) becomes negative at 4 units. c) increases at a diminishing rate, reaches a maximum, and then declines. d) is maximized at 2 units.

the income effect

steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived, he discovered that hamburgers were on sale for $1 each, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by a) the substitution effect. b) the income effect. c) the price effect. d) a rightward shift in the demand curve for hamburgers.

1.37

suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118. Then the absolute value of the price elasticity (using the midpoint formula) is: A)4.00. B) 2.09. C) 1.37. D) 3.94.

1.2

suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion of the demand curve, price elasticity of demand is: a) 0.8. b) 1.2. c) 1.6. d) 8.0.

decreased by 7 percent

suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded a) increased by 7 percent. b) decreased by 7 percent. c) decreased by 9 percent. d) decreased by 1.75 percent.

let it be

the French term "laissez-faire" means

utility

the ability of a good or service to satisfy wants is called: a) utility maximization. b) opportunity cost. c) revenue potential. d) utility

percentage change in quantity demanded/percentage change in price

the basic formula for the price elasticity of demand coefficient is: A) absolute decline in quantity demanded/absolute increase in price. B) percentage change in quantity demanded/percentage change in price. C) absolute decline in price/absolute increase in quantity demanded. D) percentage change in price/percentage change in quantity demanded.

allow one to reason about the relationship between variables X and Y without the intrusion of variable Z

the basic purpose of the other-things-equal assumption is to a) allow one to reason about the relationship between variables X and Y without the intrusion of variable Z. b) allow one to focus upon micro variables by ignoring macro variables. c) allow one to focus upon macro variables by ignoring micro variables. d) determine whether X causes Y or vice versa.

price

the construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is a) price b) expectations c) preferences d) incomes

price and quantity demanded

the demand curve shows the relationship between a) money income and quantity demanded. b) price and production costs. c) price and quantity demanded. d) consumer tastes and quantity demanded.

8 units of utility

the first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is: a) 26 units of utility. b) 6 units of utility. c) 8 units of utility d) 38 units of utility.

$6 and $4

the marginal utility of the last unit of apples consumed is 12, and the marginal utility of the last unit of bananas consumed is 8. What set of prices for apples and bananas, respectively, would be consistent with consumer equilibrium? a) $4 and $6 b) $6 and $4 c) $8 and $12 d) $16 and $9

buyer responsiveness to price changes

the price elasticity of demand coefficient measures A) buyer responsiveness to price changes. B) the extent to which a demand curve shifts as incomes change. C) the slope of the demand curve. D) how far business executives can stretch their fixed costs.