Test 1
An economic justification for government providing public goods and services is that many people can benefit regardless of whether they pay or not.
True
Every economic choice has an opportunity cost.
True
Surpluses cause prices to fall while shortages cause prices to rise.
True
A production possibility graph slopes down because of:
nonhomogeneous resources.
Other things being equal, the effects of an increase in the price of orange juice would best be represented by a(n):
upward movement along the demand curve for orange juice.
Compared to ideal economic efficiency, when the production of a good generates external costs, competitive markets will result in an output that is too:
small and a price that is too low. (incorrect)
In Exhibit 3-15, if the market price of good X is initially $1.50, a movement toward equilibrium requires:
the price to fall below $1.50, the quantity supplied to fall, and the quantity demanded to rise.
Which of the following best represents the effects of an increase in the price of coffee, other things being equal?
An upward movement along the demand curve for coffee.
The ability of an economy to produce greater levels of output in the same period of time is called:
Economic Growth
An equilibrium price is unaffected by nonprice factors.
False
Assuming an economy is already experiencing full employment, then it must produce more consumer goods and fewer capital goods if it wishes to experience greater rates of economic growth over time.
False
Excess quantity demanded for a good creates pressure to push the price of that good down toward the equilibrium price.
False
Higher milk prices reduce the demand for milk.
False
If the cost of producing a good rises for sellers, equilibrium price rises because of a decrease in demand.
False
Only socialist economies need to answer the What, How, and For Whom questions.
False
Price floors typically improve market efficiency.
False
Public goods are overproduced in the marketplace.
False
Suppose A and B are substitute goods. Other things being equal, the demand curve for A will shift to the right when the price of B goes down.
False
The most efficient point on the production possibilities curve is the midpoint on the curve.
False
The supply curve for chicken will shift to the right, if production costs increase.
False
A nation's current location on its production possibilities curve can determine the future location of that nation's production possibilities curve.
True
Suppose a price ceiling is set by the government below the market equilibrium price. Which of the following will result?
The quantity demanded will exceed the quantity supplied.
We can find the market demand for pears by:
adding up all the individual demand curves for pears.
The opportunity cost to a city for using local tax revenues to construct a new park is the:
best alternative foregone by building the park.
Exhibit 4-8 Demand and supply curves In Exhibit 4-8, a movement from A to C is best described as a(n):
decrease in both quantity demanded and quantity supplied (incorrect)
Exhibit 4-6 Demand and supply curves If the market demand and supply curves shift as given in Exhibit 4-6, the resulting new equilibrium will show a(n):
decrease in market price and an increase in the quantity exchanged.
When the production possibilities curve is bowed out, resources are:
increasing as more of one good is produced. (incorrect)
Exhibit 2-3 Production possibilities curve data A B C D E Capital goods 0 1 2 3 4 Consumer goods 20 18 14 8 0 According to the data given in Exhibit 2-3, the production of 1 unit of capital goods and 14 units of consumer goods:
is possible but would be inefficient. may be a result of unemployment. may be a result of unused natural resources. all of these.
If a chemical factory causes noxious fumes to be emitted in the neighborhood, a third party would be:
local homeowners
When economists say the quantity supplied of a product has increased, they mean the:
price of the product has risen, and consequently, suppliers are producing more of it.