Module quizzes

What would probably occur if government policies to reduce poverty or to encourage economic equality, were taken to extremes?

It would reduce incentives for economic output.

When an owner uses resources they own in a business, that usage should be considered _______

implicit cost

The demand for labor is a derived demand because

it is dependent on the demand for output.

What are the factors of production?

land, economic capital, labor, entrepreneurship

The ability of a model to predict outcomes (accurately) is an indicator that

the assumptions of the model are generally accurate.

If incomes rise for both low-income and high-income workers, but rise less for the high-income workers,

then poverty will fall and inequality will fall.

What is total surplus area?

$210

Which of the following are examples of economic activities with negative externalities?

A gold mine discharging arsenic into a natural lake that it's using for a tailings pond.

Which of these are used to determine the poverty line in the U.S.?

Amount of income to cover basic standard of living.

Which of the following describe a product with an inelastic demand?

An appointment with a dentist.

Why would businesses choose to reduce pollution?

Because their marginal cost is lower or equal to the marginal benefit of the reduction.

What is a key difference between the short run and the long run?

In the long run, all resources are variable; in the short run, at least one resource is fixed.

Where does an earning gap continue to exist in the U.S.?

It exists between both gender and race.

Most demand curves have a negative slope because

Most demand curves have a negative slope because

The earnings gap in the U.S. labor market between black and white workers ________.

The earnings gap in the U.S. labor market between black and white workers ________.

What happens to the value of a firm's additional output sold when the firm has some market power?

The value of that additional output sold is its marginal revenu

Which of the following is a potential source of income inequality?

Wage disparity

Which of the following are examples of positive externalities?

You are a bird watcher, and your neighbor puts up birdhouses and gardens to attract birds.

A Lorenz curve graphs the ________ received by everyone up to a certain quintile.

cumulative shares of income

If immigration consists of mainly high-skilled workers, then a(n) ________ in immigration will ________ the wages of high-skilled workers.

decrease; increase

The concept of derived demand of labor means that

demand for labor is created from a demand for a good or service

Economist use the ________ method to study income distribution in an economy.

dividing a whole group into fifths, or quintiles

In economics, functions often describe cause and effect. In an economic function, the variable being described on the left-hand side represents a(n) ________?

effect

A source of income inequality is ________.

family structure

Employment will be lower in a(n) ________ competitive industry than in a ________ competitive industry

imperfectly; perfectly

Over the past half of a century in the United States, ethnic diversity and racial diversity is ________.

increasing

The effects of a poverty trap can be reduced by ________.

initially decreasing the government payments by smaller amounts

For firms with market power, they choose the number of workers where the market wage equals the firm's ________.

marginal revenue product

A public good is a good that is ________, and thus is difficult for market producers to sell to individual consumers.

nonexcludable and nonrivalrous

Which is a true statement about marginal benefit?

o an individual, one good may have a larger marginal benefit than than another.

When the social benefit of producing a good is higher than the private benefit, then

positive externalities exist.

An extremely high degree of ________, with very high taxes on the rich, would be likely to discourage work and entrepreneurship.

redistribution

Markets are inefficient when

social costs are different from private costs

The poverty line is determined by ________.

the level of income needed to cover basic needs

Economists would say that the decisions we make are influenced by

trade offs

If U.S. immigration consists of mainly low-skilled workers, then an increase in immigration ________ the wages of low-skilled workers.

will reduce

In order to maximize profit, firms will choose to

use the combination of available resources and technology that will minimize cost.

In October and November, Annabelle purchased winter sweaters and tights and spent all her clothing budge on those items. Each sweater was $100. At Annabelle's optimal choice, her marginal utility from the last sweater purchased is 400 and her marginal utility from the last pair of tights purchased is 200. This means that each pair of tights must cost ________.

$50

oseph has a budget of $11 to spend at the food court in the mall. His two favorite items are tacos (Product X) which cost $5 and cinnamon buns (Product Y) which cost $2. In the schedule below you can see the marginal utility for each of his favorite foods. What combination would maximize Joseph's utility and meal?

1 Taco and 3 cinnamon buns

The table below shows cost data for WipeOutSki Company, which manufactures skis for beginners. If the company's fixed costs are $30, what is the average variable cost in A?

12.50

A business produces 10 units of output. Its average variable cost (AVC) = $25, average fixed cost (AFC) = $5, and marginal cost (MC) = $30. The firm's average total cost (ATC) is ________.

30

f Pepsi goes on sale, what will happen to the demand for Coca-Cola?

Demand for Coca-Cola will decrease

Elasticity measures the behavioral response of economic agents in a given situation. Which question is likely to be answered using elasticity?

If a restaurant puts their pizza on sale, will the additional number of pizzas sold offset the discount on each item? Will their sales revenues for pizza go up or down?

Consider peanut butter as a normal good and answer the questions of what would happen if a decrease in income occured?

It would cause the quantity consumed of peanut butter to decrease.

Kevin is maximizing his utility consumption of almond butter sandwiches and sushi. There is a boom in fish in the summer and the price of sushi suddenly drops. What will the price change most likely change in Kevin's consumption behaviour?

Kevin will increase consumption with the bundle of goods at a new higher indifference curve tangent to the new budget constraint.

What happens to marginal cost if a business's average total cost is decreasing?

Marginal cost must be lower than average total cost.

t is said that the rational consumer will act according to his or her self-interest, and that self-interest can include a concern for one's family and friends, but not often society as a whole. Which of the following illustrates this type of decision?

The boat rental was worth the additional fish caught, regardless of how little fish we left behind.

Which topic below best applies to microeconomics?

The price that a farmer asks for her watermelons.

The reason the substitution effect works to encourage a consumer to buy less of a product when its price increases is Correct!

The product is now relatively more expensive than it was before.

How does a production possibilities model differ from a budget constraint model?

The production possibilities model demonstrates diminishing returns

The largest national herbal supplement store is running a sale on its excess supply of Vitamin C supplements. With this new price change what do you think will happen to the Vitamin C supplement market?

There will be an increase only in the quantity demanded

According to the law of demand, assuming other factors are held constant,

as the price of bread increases, the quantity of bread demanded will decrease.

According to the law of supply, assuming other factors are held constant

as the price of milk decreases, the quantity of milk supplied will decrease.

Which of the following represents producer surplus?

b

Land, or natural resources, include(s) the fertility of the land, minerals below it, and

climate

Self-interest is not necessarily selfish, some say. In fact, self-interest likely includes an individual's consideration for

close friends and family.

Making an economically rational decision requires

considering prospective benefits and costs to oneself

When the Long Run Average Cost (LRAC) curve is horizontal, it implies that there are ________.

constant returns to scale

Antitrust laws help guard against mergers that could hurt ________.

consumers

Greg eats pizza every day of the week. The marginal utility of pizza will most likely ________ by the end of the week, and all else being equal, this demonstrates the law of ________.

decrease; diminishing marginal utility

The price for a cell phone case is $25 with the quantity demanded at 10,000 a day. As time goes on the price for a cell phone case increases to $30 and the quantity demanded decreases to 5,000 a day. Based on the price elasticity of demand using the midpoint method, this cell phone case is

elastic

price ceiling creates ________ when it is set ________ the equilibrium price.

excess demand; below

Price floors typically result in ________.

excess supply

A price floor creates ________ when it is set ________ the equilibrium price.

excess supply; above

Marcus is considering which college major to choose. In taking a rational approach, Marcus should consider

he benefit each major would bring and the cost of the degree.

marginal cost

he cost of obtaining or producing one more unit of something.

When a 10% increase in income causes a 4% increase in quantity demanded of a good

he income elasticity is .4 and the good is a normal good.

Total revenue is defined as ________ and represented as ________.

he price of a product times the number of units sold; TR=P x Qd

Budget constraints impose scarcity. They are based upon

he prices of the items purchased.

Suppose the local government is concerned about the health of local school children, and for that reason imposes a price ceiling of $3 on yogurt. Based on the graph below, which of the following is true?

he quantity supplied will be 3 yogurts (red supply line intersect the price ceiling line)

Accounting profit tends to be

higher than economic profit because economic cost includes implicit and explicit costs.

The flatter the demand curve, the ________.

higher the elasticity of demand

Price ceilings attempt to make consumer prices

lower

economic capital is productive, so it does NOT include

money

Which of the following is most likely to be a fixed cost?

mortgage payments

f the price of organic beef steak, regular beef steak, and pork chops each increased by 10%. Which of the products would you think was the most elastic. In other words, which has the most change to the quantity demanded because of the increase in price?

organic beef steak

Consumer surplus is best described as the extra benefit consumers receive when they ________. Correct!

pay less than they would have been willing to pay

The cross-price elasticity of demand is ________ for substitute goods and ________ for complementary goods

positive; negative

When certain assumptions are used to create a model of reality, its value can be tested and determined by its ability to

predict outcomes.

The federal minimum wage is an example of a

price floor

The production possibilities model illustrates an inverse relationship between two goods or services because

production of different types will compete for limited resources.

In order to explain consumer behavior that is irrational, behavioral economics uses observations from ________.

psychology

Elastic supply occurs if the change in quantity supplied is ________ to a change in price.

relatively responsive

Price ceilings typically result in ________

shortages

You are a lawyer representing a client who lost their $1 million home in a house fire. They are suing the home's architect as design flaws were a major cause of the fire. How large would the damages awarded by the court to your client need to be in order for them to be equally happy as they were before the fire?

some amount greater than $1 million

The advantages that society gains through trade lie in the ability to

specialize resources to the uses where opportunity cost is minimized.

An Uber driver faces costs for driving that include sunk costs like insurance that contribute to the average cost per mile of $.50. Yet when a rider offers to pay less than that for a ride, the driver agrees because

sunk costs like auto insurance (in this case) do not increase as driving increases.

A drought decreases the supply of agricultural products. This means that at any given price, a lower quantity will be supplied. Conversely, especially good weather would shift the

supply curve to the right.

f a technology change reduces a company's production costs, i.

t will shift the supply curve to the right

The utility an individual will receive from consuming a good is determined by

that individual's own preferences.

Marginal product refers to

the change in output or production divided by the change in variable inputs (labor).

he elasticity of demand is defined as

the percentage change in quantity demanded divided by the percentage change in price.

Scarcity is a condition that is everywhere and always, since it is based upon two assumptions that reflect permanent universal conditions. The assumptions are that more output will satisfy more wants and

the world has limited productive resources.

A competitive market is one in which

there is a large number of buyers and sellers.