Module Chapter Quizzes
The art in scientific thinking—whether in chemistry, economics, or biology—is a. knowing when to stop collecting data and when to start analyzing the data. b. deciding which assumptions to make. c. the design and implementation of laboratory experiments. d. being able to mathematically model natural phenomena.
b. deciding which assumptions to make.
A legal minimum on the price at which a good can be sold is called a a. price subsidy. b. price floor. c. tax. d. price ceiling.
b. price floor.
Which of the following is not a determinant of the demand for a particular good? a. The prices of related goods b. Income c. The prices of the inputs used to produce the good d. Tastes
c. The prices of the inputs used to produce the good
The production possibilities frontier provides an illustration of the principle that a. governments can sometimes improve market outcomes. b. people respond to incentives. c. people face trade-offs. d. trade can make everyone better off.
c. people face trade-offs.
If something happens to alter the quantity supplied at any given price, then a. we move along the supply curve. b. the supply curve becomes flatter. c. the supply curve shifts. d. the supply curve becomes steeper.
c. the supply curve shifts.
In the housing market, supply and demand are a. more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. b. more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. c. more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. d. more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the short run than in the long run.
b. more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.
A demand curve reflects each of the following except the a. value each buyer in the market places on the good. b. quantity that each buyer will ultimately purchase. c. willingness to pay of all buyers in the market. d. highest price buyers are willing to pay for each quantity.
b. quantity that each buyer will ultimately purchase .
Moving production from a high-cost producer to a low-cost producer will a. lower producer surplus. b. raise total surplus. c. lower total surplus. d. raise producer surplus but lower consumer surplus.
b. raise total surplus.
An example of a perfectly competitive market would be the a. cable TV market. b. soybean market. c. shampoo market. d. breakfast cereal market.
b. soybean market.
In the ordered pair (20, 30), 20 is the a. the x-coordinate and the vertical location of the point. b. the x-coordinate and the horizontal location of the point. c. the y-coordinate and the vertical location of the point. d. the y-coordinate and the horizontal location of the point.
b. the x-coordinate and the horizontal location of the point.
A seller's opportunity cost measures the a. out-of-pocket expenses to produce a good but not the value of her time. b. value of everything she must give up to produce a good. c. consumer surplus. d. amount she is paid for a good minus her cost of providing it.
b. value of everything she must give up to produce a good.
What happens to consumer surplus in the cell phone market if cell phones are normal goods and buyers of cell phones experience an increase in income? a. Consumer surplus may increase, decrease, or remain unchanged. b. Consumer surplus remains unchanged. c. Consumer surplus decreases. d. Consumer surplus increases.
a. Consumer surplus may increase, decrease, or remain unchanged.
For which of the following goods is the income elasticity of demand likely highest? a. Diamonds b. Water c. Hamburgers d. Housing
a. Diamonds
If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then a. Iowa has a comparative advantage in the production of corn. b. Iowa has an absolute advantage in the production of corn. c. Iowa should import corn from Oklahoma. d. Oklahoma should produce just enough corn to satisfy its own residents' demands.
a. Iowa has a comparative advantage in the production of corn.
In the circular-flow diagram, which of the following is not a factor of production? a. Money b. Labor c. Land d. Capital
a. Money
Which of the following is correct? a. Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor. b. Rent control and the minimum wage are both examples of price floors. c. Rent control is an example of a price floor, and the minimum wage is an example of a price ceiling. d. Rent control and the minimum wage are both examples of price ceilings.
a. Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor.
Which of the following is true when the price of a good or service rises? a. Some buyers exit the market. b. The total consumer surplus in the market increases. c. Buyers who were already buying the good or service are better off. d. The total value of purchases before and after the price change is the same.
a. Some buyers exit the market.
You receive a paycheck from your employer, and your pay stub indicates that $300 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct? a. The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee. b. You will owe $300 per paycheck to pay the FICA tax for the remainder of the fiscal year regardless of your wages. c. Your employer is required by law to pay $150 to match half the $300 deducted from your check. d. This type of tax is an example of a sales tax.
a. The $300 that you paid is not necessarily the true burden of the tax that falls on you, the employee.
Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot. a. The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise. b. The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances. c. Only half of the cost of the parking permit is part of the opportunity cost of attending college. d. The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise.
a. The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise.
Which of the following is likely to have the most price elastic demand? a. Tommy Hilfiger jeans b. Blue jeans c. Clothing d. Pants
a. Tommy Hilfiger jeans
The most obvious benefit of specialization and trade is that they allow us to a. consume more goods than we otherwise would be able to consume. b. work more hours per week than we otherwise would be able to work. c. consume more goods by forcing people in other countries to consume fewer goods. d. spend more money on goods that are beneficial to society, and less money on goods that are harmful to society.
a. consume more goods than we otherwise would be able to consume.
Eva wants to create a graph containing the prices of concert tickets and the corresponding quantities of concert tickets demanded by customers. She should use a a. coordinate system. b. time-series graph. c. bar graph. d. pie chart.
a. coordinate system.
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. Refer to Scenario 5-2. The change in equilibrium quantity will be a. greater in the bread market than in the aged cheddar cheese market. b. the same in the aged cheddar cheese and bread markets. c. unknown without more information. d. greater in the aged cheddar cheese market than in the bread market.
a. greater in the bread market than in the aged cheddar cheese market.
A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it a. maximizes the combined welfare of buyers and sellers. b. minimizes costs and maximizes output. c. maximizes both the total revenue for firms and the quantity supplied of the product. d. minimizes the level of welfare payments.
a. maximizes the combined welfare of buyers and sellers.
If a tax is levied on the sellers of a product, then the demand curve will a. not shift. b. shift up. c. shift down. d. become flatter.
a. not shift
What must be given up to obtain an item is called a. opportunity cost. b. absolute value. c. out-of-pocket cost. d. comparative worth.
a. opportunity cost
A legal minimum on the price at which a good can be sold is called a a. price floor. b. price ceiling. c. price subsidy. d. tax.
a. price floor.
When OPEC raised the price of crude oil in the 1970s, it caused the a. supply of gasoline to decrease. b. demand for gasoline to decrease. c. supply of gasoline to increase. d. demand for gasoline to increase.
a. supply of gasoline to decrease.
Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift a. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages. b. supply, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially sweetened beverages. c. demand, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially sweetened beverages. d. demand, raising both the equilibrium price and quantity in the market for artificially sweetened beverages.
a. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages.
When a country has a comparative advantage in producing a certain good, a. then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier. b. the country's opportunity cost of that good is high relative to other countries' opportunity costs of that same good. c. the country should produce just enough of that good for its own consumption. d. the country should import that good.
a. then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier .
Max and Maddy charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, seven people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have seven or five cars parked on their lawn does not affect their costs. From this information it follows that a. they would do better charging $15 than $10. b. it does not matter if they charge $10 or $15. c. they should raise the price even more. d. they should leave the price at $10.
a. they would do better charging $15 than $10.
Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks. Which of the following is not possible? a. Jim has an absolute advantage in the production of baseball bats and a comparative advantage in the production of hockey sticks. b. Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks. c. Jim has an absolute advantage in the production of hockey sticks and a comparative advantage in the production of baseball bats. d. Jim has an absolute advantage in the production of baseball bats and in the production of hockey sticks.
b. Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks.
If the price of natural gas rises, when is the price elasticity of demand likely to be the highest? a. Three months after the price increase b. One year after the price increase c. One month after the price increase d. Immediately after the price increase
b. One year after the price increase
What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell? a. Quantity would fall, and the effect on price would be ambiguous. b. Price would fall, and the effect on quantity would be ambiguous. c. Price would rise, and the effect on quantity would be ambiguous. d. Quantity would rise, and the effect on price would be ambiguous.
b. Price would fall, and the effect on quantity would be ambiguous.
Which of the following events would increase producer surplus? a. Sellers' costs increase and the price of the good decreases. b. Sellers' costs stay the same and the price of the good increases. c. Sellers' costs stay the same and the price of the good decreases. d. Sellers' costs increase and the price of the good stays the same.
b. Sellers' costs stay the same and the price of the good increases.
Suppose that when the price of a 16 oz. to-go cup of gourmet coffee is $4.25, students purchase 750 cups per day. If the price decreases to $3.75 per cup, which of the following is the most likely outcome? a. Students would purchase fewer than 750 cups per day. b. Students would purchase more than 750 cups per day. c. Student would continue to purchase 750 cups per day. d. We do not have enough information to answer this question.
b. Students would purchase more than 750 cups per day.
Which of the following areas of study typifies macroeconomics as opposed to microeconomics? a. The effects of rent control on the availability of housing in New York City b. The effect on the economy of changes in the nation's unemployment rate c. The economic impact of tornadoes on cities and towns in Oklahoma d. How tariffs on shoes affects the shoe industry
b. The effect on the economy of changes in the nation's unemployment rate
What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce them? a. Both the equilibrium price and quantity would increase. b. The equilibrium price would decrease, and the equilibrium quantity would increase. c. Both the equilibrium price and quantity would decrease. d. The equilibrium price would increase, and the equilibrium quantity would decrease.
b. The equilibrium price would decrease, and the equilibrium quantity would increase.
After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events could prompt you to reverse this decision? a. The marginal cost of going to Spain increases. b. The marginal benefit of going to Spain increases. c. The marginal benefit of going to Ireland increases. d. The marginal cost of going to Ireland decreases.
b. The marginal benefit of going to Spain increases.
The current price of blue jeans is $30 per pair, but the equilibrium price of blue jeans is $25 per pair. As a result, which of the following statements is not true? a. There is a surplus of blue jeans at the $30 price. b. There is a shortage of blue jeans at the $30 price. c. The quantity supplied of blue jeans exceeds the quantity demanded of blue jeans at the $30 price. d. The equilibrium quantity of blue jeans exceeds the quantity demanded at the $30 price.
b. There is a shortage of blue jeans at the $30 price.
Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct? a. Forty percent of the burden of the tax falls on buyers. b. This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity. c. The price paid by buyers is $0.20 per drink more than it was before the tax. d. This tax causes the supply curve for fountain drinks to shift downward by $0.50 at each quantity.
b. This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.
When we move along a given demand curve, a. income and price are held constant. b. all nonprice determinants of demand are held constant. c. only price is held constant. d. all determinants of quantity demanded are held constant.
b. all nonprice determinants of demand are held constant.
If a decrease in income increases the demand for a good, then the good is a. a normal good. b. an inferior good. c. a complementary good. d. a substitute good.
b. an inferior good.
If a tax is levied on the sellers of flour, then a. buyers will bear the entire burden of the tax. b. buyers and sellers will share the burden of the tax. c. sellers will bear the entire burden of the tax. d. the government will bear the entire burden of the tax.
b. buyers and sellers will share the burden of the tax.
Equilibrium price must decrease when demand a. decreases and supply does not change, when demand does not change and supply increases, and when demand increases and supply decreases simultaneously. b. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously. c. increases and supply does not change, when demand does not change and supply decreases, and when demand decreases and supply increases simultaneously. d. increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases simultaneously.
b. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously.
If the government wants to reduce the burning of fossil fuels, it should impose a tax on a. whichever side of the market is less elastic. b. either buyers or sellers of gasoline. c. only the buyers of gasoline. d. only the sellers of gasoline.
b. either buyers or sellers of gasoline.
If the cost of producing sofas decreases causing the price of sofas to decrease, consumer surplus in the sofa market will a. remain constant. b. increase. c. increase for some buyers and decrease for other buyers. d. decrease.
b. increase.
Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by a. 30 percent. b. 250 percent. c. 40 percent. d. 80 percent.
c. 40 percent.
Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15 percent, then the quantity supplied of cheese will increase by a. 1.7 percent in the short run and 0.7 percent in the long run. b. 25 percent in the short run and 10.7 percent in the long run. c. 9 percent in the short run and 21 percent in the long run. d. 0.4 percent in the short run and 4.6 percent in the long run.
c. 9 percent in the short run and 21 percent in the long run.
The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book? a. John Maynard Keynes b. Thorstein Veblen c. Adam Smith d. David Ricardo
c. Adam Smith
If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins rises? a. The equilibrium price would decrease, and the equilibrium quantity would increase. b. The equilibrium price would increase, and the equilibrium quantity would decrease. c. Both the equilibrium price and quantity would decrease. d. Both the equilibrium price and quantity would increase.
c. Both the equilibrium price and quantity would decrease.
Which tools allow economists to determine if the allocation of resources determined by free markets is desirable? a. The equilibrium price and quantity b. Incomes of and prices paid by buyers c. Consumer and producer surplus d. Profits and costs to firms
c. Consumer and producer surplus
Sometimes economists disagree because their scientific judgments differ. Which of the following instances best reflects this source of disagreement? One economist believes that manufacturing firms should face greater regulation to preserve the environment; another economist believes the government should not intervene in free markets. One economist believes everyone should pay the same percentage of their income in taxes; another economist believes that wealthier citizens should pay a higher percentage of their income in taxes. One economist believes the government should tax a household's income; another economist believes the government should tax a household's consumption because it will cause households to save more. One economist believes that equality should be valued over efficiency in policy decisions; another economist believes that efficiency should be valued over equality in policy decisions.
c. One economist believes the government should tax a household's income; another economist believes the government should tax a household's consumption because it will cause households to save more.
The federal government uses the revenue from the FICA (Federal Insurance Contribution Act) tax to pay for a. housing subsidies for low-income people. b. the salaries of members of Congress. c. Social Security and Medicare. d. unemployment compensation.
c. Social Security and Medicare.
A tax on the buyers of cameras encourages a. sellers to supply a smaller quantity at every price. b. sellers to supply a larger quantity at every price. c. buyers to demand a smaller quantity at every price. d. buyers to demand a larger quantity at every price.
c. buyers to demand a smaller quantity at every price.
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. Refer to Scenario 5-2. Total consumer spending on aged cheddar cheese will a. increase, and total consumer spending on bread will decrease. b. decrease, and total consumer spending on bread will increase. c. decrease, and total consumer spending on bread will decrease. d. increase, and total consumer spending on bread will increase.
c. decrease, and total consumer spending on bread will decrease.
Equilibrium quantity must decrease when demand a. decreases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease. b. increases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease. c. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease. d. increases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.
c. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.
The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate a. increases, and producer surplus decreases. b. decreases, and producer surplus increases. c. decreases, and producer surplus decreases. d. increases, and producer surplus increases.
c. decreases, and producer surplus decreases.
Pizza is a normal good if the demand a. for pizza rises when the price of pizza falls. b. curve for pizza slopes upward. c. for pizza rises when income rises. d. curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes.
c. for pizza rises when income rises.
Emily and Betsey are economists. Emily thinks that the wealthiest 10 percent of the U.S. population should be taxed a rate higher than the rest of society because they can better afford it. Betsey thinks that everyone should be taxed at the same rate because that is the fairest scenario and the wealthy should not be penalized for their success. In this example, Emily and Betsey a. disagree because they have access to contradicting positive statements. b. disagree about the validity of a positive theory. c. have different normative views about tax policy. d. must both be incorrect because tax policy is never that simple.
c. have different normative views about tax policy.
The goal of rent control is to a. help the poor by assuring them an adequate supply of apartments. b. help landlords by assuring them a low vacancy rate for their apartments. c. help the poor by making housing more affordable. d. facilitate controlled economic experiments in urban areas.
c. help the poor by making housing more affordable.
If the demand for donuts is elastic, then a decrease in the price of donuts will a. decrease total revenue of donut sellers. b. not change total revenue of donut sellers. c. increase total revenue of donut sellers. d. There is not enough information to answer this question.
c. increase total revenue of donut sellers.
If the government removes a binding price ceiling from a market, then the price paid by buyers will a. decrease, and the quantity sold in the market will decrease. b. decrease, and the quantity sold in the market will increase. c. increase, and the quantity sold in the market will increase. d. increase, and the quantity sold in the market will decrease.
c. increase, and the quantity sold in the market will increase.
Suppose an increase in the price of rubber coincides with an advance in the technology of tire production. As a result of these two events, the demand for tires a. decreases, and the supply of tires increases. b. is unaffected, and the supply of tires increases. c. is unaffected, and the supply of tires could increase, decrease, or stay the same. d. is unaffected, and the supply of tires decreases.
c. is unaffected, and the supply of tires could increase, decrease, or stay the same.
An economy's production of two goods is efficient if a. the opportunity cost of producing more of one good is zero. b. all members of society consume equal portions of the goods. c. it is impossible to produce more of one good without producing less of the other. d. the goods are produced using only some of society's available resources.
c. it is impossible to produce more of one good without producing less of the other.
One disadvantage of government subsidies over price controls is that subsidies a. prevent the attainment of equilibrium in the markets in which they are imposed. b. are always unfair to those with low incomes. c. make higher taxes necessary. d. cause unemployment.
c. make higher taxes necessary.
Rent-control laws dictate a. only a minimum rent that landlords may charge tenants. b. both a minimum rent and a maximum rent that landlords may charge tenants. c. only a maximum rent that landlords may charge tenants. d. the exact rent that landlords must charge tenants.
c. only a maximum rent that landlords may charge tenants.
Minimum-wage laws dictate a. only a maximum wage that firms may pay workers. b. both a minimum wage and a maximum wage that firms may pay workers. c. only a minimum wage that firms may pay workers. d. the exact wage that firms must pay workers.
c. only a minimum wage that firms may pay workers.
Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is a. negative, and the good is a normal good. b. positive, and the good is an inferior good. c. positive, and the good is a normal good. d. negative, and the good is an inferior good.
c. positive, and the good is a normal good.
The imposition of a binding price ceiling on a market causes a. the price of the good to be greater than its equilibrium price. b. quantity demanded to be less than quantity supplied. c. quantity demanded to be greater than quantity supplied. d. quantity demanded to be equal to quantity supplied.
c. quantity demanded to be greater than quantity supplied.
Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by a. a strong reliance on prices and individuals' self-interests. b. a market economy. c. the actions of government central planners. d. a system of large privately owned firms.
c. the actions of government central planners.
A simultaneous increase in both the demand for tablets and the supply of tablets would imply that a. the value of tablets to consumers has decreased, and the cost of producing tablets has increased. b. both the value of tablets to consumers and the cost of producing tablets has increased. c. the value of tablets to consumers has increased, and the cost of producing tablets has decreased. d. both the value of tablets to consumers and the cost of producing tablets has decreased.
c. the value of tablets to consumers has increased, and the cost of producing tablets has decreased.
In the simple-circular flow diagram, the flow of money from the firms to the markets for factors of production is called a. income. b. revenue. c. wages, rent, and profit. d. spending.
c. wages, rent, and profit.
If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is a. positive, and the consumer would purchase the product. b. There is not enough information given to answer this question. c. zero. d. negative, and the consumer would not purchase the product.
c. zero.
Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase total revenue? a. 1 b. 0 c. 4 d. 0.4
d. 0.4
For which of the following individuals would the opportunity cost of going to college be highest? a. A student with average grades who has never held a job b. A student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball c. A promising young mathematician who will command a high salary once she earns her college degree d. A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree
d. A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree
In the circular-flow diagram, which of the following is not a factor of production? a. Land b. Capital c. Labor d. Money
d. Money
Some, but not all, government economists are employed within the administrative branch of government. Which of the following government agencies employ economists outside of the administrative branch? a. The Department of the Treasury b. The Council of Economic Advisers c. The Department of Labor d. The Congressional Budget Office
d. The Congressional Budget Office
Which of the following will cause an increase in producer surplus? a. Buyers expect the price of the good to be lower next month b. Income increases and buyers consider the good to be inferior c. The imposition of a binding price ceiling in the market d. The price of a substitute increases
d. The price of a substitute increases
How are economists not like mathematicians, physicists, and biologists? a. They devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories. b. They use models to represent the real world. c. They try to address their subject with a scientist's objectivity. d. They cannot run lab experiments in the same way that other scientists can.
d. They cannot run lab experiments in the same way that other scientists can.
If the demand for a product increases, then we would expect equilibrium price a. and equilibrium quantity both to decrease. b. to decrease and equilibrium quantity to increase. c. to increase and equilibrium quantity to decrease. d. and equilibrium quantity both to increase.
d. and equilibrium quantity both to increase.
On a graph, consumer surplus is represented by the area a. below the demand curve and to the right of equilibrium price. b. below the price and above the supply curve. c. between the demand and supply curves. d. below the demand curve and above price.
d. below the demand curve and above price.
Ryan produces hair clips and earrings. Celia also produces hair clips and earrings, but Ryan is better at producing both goods. In this case, trade could a. benefit Celia, but not Ryan. b. benefit neither Celia nor Ryan. c. benefit Ryan, but not Celia. d. benefit both Celia and Ryan.
d. benefit both Celia and Ryan.
The price elasticity of demand measures a. the extent to which demand increases as additional buyers enter the market. b. how much more of a good consumers will demand when incomes rise. c. the movement along a supply curve when there is a change in demand. d. buyers' responsiveness to a change in the price of a good.
d. buyers' responsiveness to a change in the price of a good.
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. Refer to Scenario 5-2. The equilibrium price will a. increase in the aged cheddar cheese market and decrease in the bread market. b. increase in both the aged cheddar cheese and bread markets. c. decrease in the aged cheddar cheese market and increase in the bread market. d. decrease in both the aged cheddar cheese and bread markets.
d. decrease in both the aged cheddar cheese and bread markets.
The goal of rent control is to a. help the poor by assuring them an adequate supply of apartments. b. facilitate controlled economic experiments in urban areas. c. help landlords by assuring them a low vacancy rate for their apartments. d. help the poor by making housing more affordable.
d. help the poor by making housing more affordable.
An example of positive analysis is studying a. if income distributions are fair. b. whether equilibrium outcomes are socially desirable. c. whether equilibrium outcomes are fair. d. how market forces produce equilibrium.
d. how market forces produce equilibrium.
When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is a. elastic. b. unit elastic. c. perfectly inelastic. d. inelastic.
d. inelastic.
When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. Using the midpoint method, we can conclude that for Heather, macaroni a. and soy-burgers are both inferior goods with income elasticities equal to -1. b. is an inferior good and soy-burgers are normal goods; both have income elasticities of 1. c. and soy-burgers are both normal goods with income elasticities equal to 1. d. is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.
d. is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.
To say that a price ceiling is nonbinding is to say that the price ceiling a. causes quantity demanded to exceed quantity supplied. b. results in a surplus. c. is set below the equilibrium price. d. is set above the equilibrium price.
d. is set above the equilibrium price.
The law of demand states that, other things equal, when the price of a good a. rises, the quantity demanded of the good rises. b. falls, the quantity demanded of the good rises. c. falls, the demand for the good rises. d. rises, the demand for the good falls.
d. rises, the demand for the good falls.
Rent control a. is the most efficient way to allocate scarce housing resources. b. serves as an example of how a social problem can be alleviated or even solved by government policies. c. is regarded by most economists as an efficient way of helping the poor. d. serves as an example of a price ceiling.
d. serves as an example of a price ceiling.
Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market? a. Equilibrium quantity and price would increase. b. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
b. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
Which of the following statements about comparative advantage is not true? a. The principle of comparative advantage applies to countries as well as to individuals. b. Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. c. Economists use the principle of comparative advantage to emphasize the potential benefits of free trade. d. A country may have a comparative advantage in producing a good, even though it lacks an absolute advantage in producing that good.
b. Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources.
Suppose there is an early freeze in California that reduces the size of the lemon crop. As the price of lemons rises, what happens to consumer surplus in the market for lemons? a. Consumer surplus increases. b. Consumer surplus decreases. c. We would have to know whether the demand for lemons is relatively elastic or inelastic to make this determination. d. Consumer surplus is not affected by this change in market forces.
b. Consumer surplus decreases.
As a student, Jordyn spends 40 hours per week writing term papers and completing homework assignments. On one axis of her production possibilities frontier is measured the number of term papers written per week. On the other axis is measured the number of homework assignments completed per week. Jordyn's production possibilities frontier is a straight line if a. the rate at which she can switch between homework assignments and term papers depends on the number of homework assignments she is completing and on the number of term papers she is writing. b. she is required by her professors to spend half of her time on term papers and the other half of her time on homework assignments. c. she faces no trade-off between writing term papers and completing homework assignments. d. she can switch between writing term papers and completing homework assignments at a constant rate.
d. she can switch between writing term papers and completing homework assignments at a constant rate.
Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because a. the Federal Reserve is worried that the economy is growing too quickly. b. the Federal Reserve is hoping to reduce the demand for goods and services. c. the Federal Reserve is worried about inflation. d. the Federal Reserve is worried about unemployment.
d. the Federal Reserve is worried about unemployment.
Efficiency in a market is achieved when a. all firms are producing the good at the same low cost per unit. b. a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs. c. no buyer is willing to pay more than the equilibrium price for any unit of the good. d. the sum of producer surplus and consumer surplus is maximized.
d. the sum of producer surplus and consumer surplus is maximized.
Under rent control, landlords can cease to be responsive to tenants' concerns about the quality of the housing because a. with rent control, the government guarantees landlords a minimum level of profit. b. they become resigned to the fact that many of their apartments are going to be vacant at any given time. c. with rent control, it becomes the government's responsibility to maintain rental housing. d. with shortages and waiting lists, they have no incentive to maintain and improve their property.
d. with shortages and waiting lists, they have no incentive to maintain and improve their property.
