Chapter 2, Econ Chapter 3,4,6,7 Review 1, Econ Chapter 3, Econ Chapter 4, Managerial Economics Exam

Suppose that the technology used to manufacture laptops has improved. The likely result would be: an increase in supply of laptops. an increase in quantity supplied of laptops. a decrease in supply of laptops. a decrease in quantity supplied of laptops.

an increase in supply of laptops.

Suppose that when a perfectly competitive firm produces 1,000 units of output, its total variable cost is $1,900. If the marginal cost of producing the 1,000th unit is $1.70, and if the market price of each unit of output is $1.70, then the firm should: shut down. raise its price. increase output. continue to produce 1000 units.

shut down.

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then the price elasticity of demand is equal to: 0.05. 0.5. 2. 5.

0.5

If cross-price elasticity of demand between two goods is positive, the two goods are: substitutes. inferior. complements. normal.

substitutes.

The primary objective of most private firms is to: maximize revenue. maximize profit. minimize cost. maximize output.

maximize profit.

Which of the following is not considered as a factor of production?

Money

If an individual producer is willing to produce one unit of a good for $2.50 but is able to sell it for $7.50, then his or her producer surplus from the sale of that unit would be: $10 $7.50 $5 $6.25

$5

A demand curve that is drawn as a vertical line has a price elasticity of demand equal to: 0. 1. infinity. the quantity.

0.

If a 10% decrease in the price of a good leads to a 20% increase in the quantity demanded, then what is the price elasticity of demand? ½. 2. 10. 20.

2

Which of the following is NOT true of a demand curve? It has negative slope. It shows the amount consumers are willing and able to purchase at various prices, holding other factors constant. It relates the price of an item to the quantity demanded of that item. It shows how an increase in price leads to an increase in quantity demanded of a good.

It shows how an increase in price leads to an increase in quantity demanded of a good.

Which of the following would cause an increase in quantity supplied of wheat? The price farmers receive for their wheat rises. The price of fertilizer farmers' use in their fields decreases. The price firms pay for liability insurance falls. New, better technology for farming is introduced.

The price farmers receive for their wheat rises.

Which of the following is NOT a determinant of demand for gasoline? Consumers' incomes. The price of diesel. The price of automobiles. The quantity of gasoline supplied.

The quantity of gasoline supplied.

Economists have found that the price elasticity of demand for water is higher in the summer than in the winter. Why is this likely to be so? Winter is longer than summer, and price elasticity is lower over longer time horizons. Summer is longer than winter, and price elasticity is higher over longer time horizons. Winter water use tends to be for necessities such as cleaning and cooking, and summer water use tends to be for both necessities and non-necessities such as gardening and recreation. People take more vacations in the summer and so use less water at home.

Winter water use tends to be for necessities such as cleaning and cooking, and summer water use tends to be for both necessities and non-necessities such as gardening and recreation.

A movement along a demand curve from one price-quantity combination to another is called: a change in quantity demanded. a shift in the demand curve. a change in demand. a change in quantity supplied.

a change in quantity demanded.

Suppose that both the equilibrium price and quantity of ketchup fall. The most consistent explanation for these observations is: a decrease in demand for ketchup with no change in supply. an increase in demand for ketchup with no change in supply. an increase in demand for ketchup and a decrease in the supply of ketchup. an increase in the supply of ketchup with no change in demand.

a decrease in demand for ketchup with no change in supply.

A market comprised of a downward-sloping demand curve that intersects an upward-sloping supply curve is said to be stable because: price will never change. quantity will never change. demand will never change. at any price other than equilibrium, forces in the market move price towards the equilibrium.

at any price other than equilibrium, forces in the market move price towards the equilibrium.

In an industry with free entry and exit, positive economic profit: indicates a market failure. can never occur. cannot be sustained indefinitely. can be sustained indefinitely.

cannot be sustained indefinitely.

If the cross-price elasticity of demand between blueberries and yogurt is negative, then the two goods are: substitutes. normal goods. complements. inferior goods.

complements.

If the cross-price elasticity of demand between two goods is -1.2, then the two goods are: inferior. elastically demanded. complements. substitutes.

complements.

The responsiveness of the quantity demanded of one good to a change in the price of a different good is measured by the: price elasticity of demand. income elasticity of demand. price elasticity of supply. cross-price elasticity of demand.

cross-price elasticity of demand.

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1%, quantity demanded would: increase by 0.33%. decrease by 0.33%. increase by 3%. decrease by 3%.

decrease by 3%.

When the supply of a good decreases, consumers will eventually: decrease their demand. increase their preferences for the good. decrease their quantity demanded. increase their quantity demanded.

decrease their quantity demanded.

Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. The lemonade market in Jenny's neighborhood is more likely to be perfectly competitive if: all of the kids advertise heavily. each stand tries to get more customers by offering different varieties of lemonade and snacks. each lemonade stand sells the same kind of lemonade. some of the neighborhood parents build elaborate booths for their kids' stands while some kids sell from makeshift tables.

each lemonade stand sells the same kind of lemonade.

A firm earns a normal profit when its: accounting profit is positive. economic profit is positive. economic profit is zero. accounting profit is zero.

economic profit is zero.

When the price of NBA tickets is $25 each, 30,000 tickets are sold. After the price rises to $30 each, 20,000 tickets are sold. At the original price, the demand for NBA ticket is: elastic. inelastic. unit elastic. perfectly elastic.

elastic.

At the midpoint of a straight-line demand curve, the price elasticity of demand is: greater than one. less than one. equal to one. zero.

equal to one.

The demand for a good is unit elastic with respect to price if the price elasticity of demand is: equal to one. greater than one. less than one. greater than negative one.

equal to one.

To produce 150 units of output, a firm must use 3 employee-hours. To produce 300 units of output, the firm must use 8 employee-hours. Apparently, the firm is: producing in the long run. experiencing diminishing returns. not using any fixed factors of production. experiencing negative returns

experiencing diminishing returns.

In a free market economy, the decisions of buyers and sellers are: random. motivated by custom and tradition. coordinated by the government. guided by prices.

guided by prices.

It takes many years to train to become an orthopedic surgeon. This suggests that, in the short run, a sudden increase in the demand for orthopedic surgeons will: not affect the salaries of orthopedic surgeons. have no impact on the number of people who decide to become orthopedic surgeons. lead to a large increase in the number of orthopedic surgeons. have little effect on the number of trained orthopedic surgeons.

have little effect on the number of trained orthopedic surgeons.

The best definition of economics is

how choices are made under conditions of scarcity.

All else equal, the price elasticity of demand for a good tends to be lower: if the good has few close substitutes. if the good represents a large share of a consumer's budget. in the long run. if the good has many close substitutes.

if the good has few close substitutes.

Suppose that there is only one small clothing store in the remote village of Green Acres, and until recently the townspeople bought their shirts there. As more people in Green Acres become connected to the Internet, the price elasticity of demand for shirts at the Green Acres store will: increase because the Internet offers more substitutes. decrease because the Internet offers more substitutes. remain the same, but the quantity demanded will decrease as more people shop online. remain the same, but the demand will decrease as more people shop online.

increase because the Internet offers more substitutes.

The situation described in the book as "Smart for One, Dumb for All" occurs when: individuals, when acting rationally, benefit society as a whole. individuals make better decisions when acting alone than when in groups. individuals, when acting rationally, fail to take advantage of all opportunities for social benefit. a market is in equilibrium.

individuals, when acting rationally, fail to take advantage of all opportunities for social benefit.

If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be: elastic. inelastic. unit elastic. perfectly elastic.

inelastic.

If demand is ______ with respect to price, a price increase will ______ total revenue. elastic; increase inelastic; increase unit elastic; decrease inelastic; decrease

inelastic; increase

According to the textbook, government price controls fail because: they are not enforced. legislation cannot repeal basic economic motives. bureaucrats lack accurate market data. firms ignore the restrictions.

legislation cannot repeal basic economic motives.

Suppose the price of a Snickers candy bar is $2.00 at both the airport and the grocery store. The price elasticity of demand for a Snickers candy bar at an airport is likely to be ______ the price elasticity of demand for a Snickers candy bar at the grocery store. less than equal to greater than the reciprocal of

less than

You would expect the price elasticity of demand for transportation generally to be: the same as price elasticity of the demand for bus tickets. greater than price elasticity of the demand for bus tickets. less than price elasticity of the demand for bus tickets. greater than price elasticity of the demand for bus tickets when bus tickets are expensive, but less than price elasticity of the demand for bus tickets when the prices of bus tickets fall.

less than price elasticity of the demand for bus tickets.

Assume the price of gasoline doubles tonight and remains at that price for the next two years. Compared with the long-run price elasticity of demand for gasoline, the short-run price elasticity of demand for gasoline will be ______. higher more variable the same lower

lower

According to the equilibrium principle: unregulated markets tend to reach equilibrium prices and quantities without government regulation. once a market has reached equilibrium, price will not change. collective action cannot improve on individual action. market equilibrium exploits all opportunities for individual gain, but may not exploit gains possible through collective action.

market equilibrium exploits all opportunities for individual gain, but may not exploit gains possible through collective action.

Buyers and sellers of a particular good comprise the: market for the good. demand for the good. supply for the good. production possibilities curve for the good.

market for the good.

Antony's Pizza uses the same dough, sauce, and cheese for pizza and calzones. When the price of pizza is low Antony produces more calzones. For Antony, the supply of pizza is ______ compared to the supply at a pizza restaurant that does not serve calzones. less price elastic more price elastic higher lower

more price elastic

During recessions, when some workers lose their jobs and have lower incomes, sales of durable goods (goods with a life expectancy of 3 years or more) decline. Apparently, durable goods are: substitutes. normal goods. complements. inferior goods.

normal goods.

If most consumer goods and services are ______, then most income elasticities are ______. normal; negative inferior; positive normal; greater than one normal; positive

normal; positive

If the demand curve for a good is a vertical line at Q = 1, then a decrease in the price of that good will: decrease the quantity demanded. increase the quantity demanded. lead the quantity demanded to fall to zero. not change the quantity demanded.

not change the quantity demanded.

One assumption of the perfectly competitive model is free entry and exit. This assumption most directly leads to the implication that: firms will have to spend money on advertising. positive economic profit is only possible in the short run. firms will compete on the basis of better service rather than lower prices. a long-run equilibrium cannot be achieved.

positive economic profit is only possible in the short run.

The percentage change in quantity supplied that results from a 1 percent change in price is known as the: cross-price elasticity of supply. slope of the supply curve. price elasticity of supply. cross-price elasticity of demand.

price elasticity of supply.

If the market for sport utility vehicles has excess supply, then one can say that: supply is greater than demand. quantity supplied is greater than quantity demanded. demand is greater than supply. quantity demanded is greater than quantity supplied.

quantity supplied is greater than quantity demanded.

In surveying their alumni, State U's economics department discovered that ramen noodle consumption declined once students graduated and found jobs. One conclusion the survey team might draw from this result is that: there is excess demand for ramen noodles. the equilibrium price for ramen noodles is too high. college graduates have a high reservation price for ramen noodles. ramen noodles are an inferior good.

ramen noodles are an inferior good.

Outsourcing is a term increasingly used to refer to the act of: A. hiring illegal immigrants. B. importing raw materials into the United States from other countries. C. exporting final goods to other countries. D. replacing relatively expensive American workers with low-wage workers overseas.

replacing relatively expensive American workers with low-wage workers overseas.

The quantity of Revlon nail polish demanded by Jen decreased after the price of Revlon nail polish increased. Jen decides to find a cheaper brand of nail polish. This is called a(n): substitution effect of a price change. income effect of a price change. decrease in buyer's reservation price. increase in buyer's reservation price.

substitution effect of a price change.

In the market for coffee, for many consumers: tea is a substitute. non-dairy creamer is a substitute. cola beverages are complements. coffee mugs are substitutes.

tea is a substitute.

Suppose that if the price of plane tickets increased, more people would choose to travel by train. If this happened, you would know that: plane tickets are an inferior good. the cross-price elasticity between plane tickets and train tickets is positive. the cross-price elasticity between plane tickets and train tickets is negative. plane tickets and train tickets are complements.

the cross-price elasticity between plane tickets and train tickets is positive.

When Taylor raised the price of earrings at Taylor's Boutique, her total revenue from selling earrings increased. This suggests that: the demand for Taylor's earrings at the original price was elastic. there are many other boutiques competing with Taylor. there was excess demand for earrings at the original price. the demand for Taylor's earrings at the original price was inelastic.

the demand for Taylor's earrings at the original price was inelastic.

The inputs used to produce cupcakes (e.g., flour, sugar, butter, and labor) are also used to produce cookies, cakes, muffins, pies and many other goods. This suggests that: the supply curve for cupcakes is downward sloping. the elasticity of supply of cupcakes is relatively high. the elasticity of supply of cupcakes is relatively low. cupcakes are a normal good.

the elasticity of supply of cupcakes is relatively high.

In general, when the supply curve shifts to the left and demand is constant then: the market cannot reestablish an equilibrium. the equilibrium price will fall. the equilibrium quantity will rise. the equilibrium price will rise.

the equilibrium price will rise.

The price elasticity of supply at a point is: the percentage change in quantity supplied divided by the percentage change in price. the percentage change in price divided by the percentage change in quantity supplied. the change in quantity supplied divided by the change in price. the change in price divided by the change in quantity supplied.

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

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. If they then still sell almost the same number of sodas per day, this suggests: students do not have good nutritional information. soda purchases represent a large fraction of students' budgets. there are few other places to purchase soda on campus. the price elasticity of demand for soda is equal to 1.

there are few other places to purchase soda on campus.

The reason a brand name item (e.g., Tyson chicken) has a larger price elasticity than a class of items (e.g., chicken) is that: there are fewer substitutes for Tyson chicken than for chicken generally. it takes a lot of time to adjust to a substitute brand of chicken. the share of income spent on "chicken" is larger than spent on "Tyson Chicken". there are fewer substitutes for chicken generally than for Tyson chicken.

there are fewer substitutes for chicken generally than for Tyson chicken.

Suppose that total expenditures for coffee reach a maximum at a price of $5 per pound. At this price, the demand for coffee is: elastic. inelastic. unit elastic. perfectly inelastic.

unit elastic.

If the slope of a demand curve is infinite, then the price elasticity of demand is: zero. infinite. one. equal to the price of the good.

zero

Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. What is the opportunity cost to Cathy of making a cake? A. 2/3 of a pie. B. 1 pie. C. 1.5 pies. D. 1.33 pies.

1.5 pies.

Assume point A on a linear production possibilities curve represents the combination of 12 coffees and 3 cappuccinos, and point B represents 3 coffees and 6 cappuccinos. Suppose coffees are on the vertical axis and cappuccinos are on the horizontal axis. The absolute value of the slope of the production possibilities curve between points A and B equals: A. 6 B. 4 C. 3 D. 1/3

3

Suppose an increase in the price of golf clubs from $75 to $125 leads to an increase in quantity supplied from 200 units to 300 units. The price elasticity of supply for golf clubs at the original price of $75 is ______, so supply is ______. 2; elastic 2; inelastic 4/3; elastic 3/4; inelastic

3/4; inelastic

Which of the following is NOT a characteristic of a market in equilibrium? Excess supply is zero. All consumers are able to purchase an amount equal to their quantity demanded. Excess demand is zero. The equilibrium price is stable, i.e., there is no pressure for it to change.

All consumers are able to purchase an amount equal to their quantity demanded.

You notice that your grocery store always has day-old bakery products at a reduced price. Why might that be? At the original price, the quantity demanded was greater than the quantity supplied. At the original price, there was a shortage of bakery products. The original price was an equilibrium price because it was established in a free market. At the original price, quantity supplied was greater than quantity demanded.

At the original price, quantity supplied was greater than quantity demanded.

Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. Which of the following statements is correct? A. Cathy should specialize in both pies and cakes. B. There are no gains from specialization and trade. C. Lewis should specialize in pies, and Cathy should specialize in cakes. D. Cathy should specialize in pies, and Lewis should specialize in cakes

Cathy should specialize in pies, and Lewis should specialize in cakes

Which of the following statements is true? A. Absolute advantage implies comparative advantage. B. Comparative advantage does not require absolute advantage. C. Absolute advantage requires comparative advantage. D. Comparative advantage requires absolute advantage.

Comparative advantage does not require absolute advantage.

Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. Suppose that the first week of summer, Jenny charged 25 cents for an 8-ounce cup of lemonade, her next-door neighbor Sam charged 50 cents for an 8-ounce cup of lemonade, and Alex across the street charged 15 cents for an 8-ounce cup of lemonade. Assuming the market for lemonade is perfectly competitive, what is most likely to happen? Everyone will start to charge 50 cents to maximize revenue. A price war will break out, and all of the kids will lower their prices. Each kid will keep his or her price at the original amount. Eventually prices will equalize across all three lemonade stands.

Eventually prices will equalize across all three lemonade stands.

Gertie saw a pair of jeans that she was willing to buy for $35. The price tag, though, said they were $29.99. Therefore: Gertie should not buy the jeans because they will be of lower quality than she expected. Gertie should not buy the jeans because the price is not equal to her reservation price. Gertie should buy the jeans because the price is less than her reservation price. Gertie should buy the jeans because the price is more than her reservation price.

Gertie should buy the jeans because the price is less than her reservation price.

Which of following is NOT true of an equilibrium price? Consumers who are willing to pay the equilibrium price can acquire the good. It measures the value of the last unit sold to consumers. It is always a fair and just price. Firms who are willing to accept the equilibrium price can sell what they produce.

It is always a fair and just price.

According to the textbook, NAFTA was expected to help which country exploit its comparative advantage in the production of goods made by unskilled labor? A. Canada B. Cuba C. Mexico D. The U.S.A

Mexico

The Principle of Increasing Opportunity Costs states that: A. productive people do the hardest tasks first. B. The Principle of Increasing C. when increasing production, resources with the lowest opportunity costs should be used last. D. opportunity costs increase when too little is produced.

The Principle of Increasing

Suppose that Nepal invests less in new factories and equipment than does the United States. This will likely cause: A. Nepal's production possibilities curve to shift outward faster than the U.S.'s. B. The U.S.'s production possibilities curve to shift inward faster than Nepal's. C. The U.S.'s production possibilities curve to shift outward faster than Nepal's. D. Nepal's production possibilities curve to shift inward faster than the U.S.'s

The U.S.'s production possibilities curve to shift outward faster than Nepal's.

Assume the demand for sugar decreases while the supply of sugar increases. Which of the following outcomes is certain to occur? The equilibrium price of sugar will rise. The equilibrium quantity of sugar will rise. The equilibrium price of sugar will fall. The equilibrium quantity of sugar will fall.

The equilibrium price of sugar will fall.

Assume both the demand and the supply of bagels increase. Which of the following outcomes is certain to occur? The equilibrium price of bagels will rise. The equilibrium quantity of bagels will rise. The equilibrium price of bagels will fall. The equilibrium quantity of bagels will fall.

The equilibrium quantity of bagels will rise.

Which of the following would not be included in the calculation of accounting profit? The wages paid to the company's workers. The salary the owner could have earned working elsewhere. The rent paid by the owner for the use of a building. The medical insurance coverage for the company's workers.

The salary the owner could have earned working elsewhere.

Suppose you bought a concert ticket from Ticketmaster for $50, but when you got to the concert scalpers (individuals who re-sell tickets at the event) were selling tickets in the same seating area as yours for $25. What is probably true? There is excess demand for this concert at the Ticketmaster price. The ticket you bought was under-priced for the market. There is an excess supply of tickets for this concert at the Ticketmaster price. The Ticketmaster price is an equilibrium price.

There is an excess supply of tickets for this concert at the Ticketmaster price.

The entire group of buyers and sellers of a particular good or service makes up: only the demand curve. only the supply curve. a market. the equilibrium.

a market

Minimum wage laws are an example of: mandated equilibrium wages. a price ceiling. a regulated price. comparative advantage for unskilled workers.

a regulated price.

The supplier of a factor of production has a reservation price of $100. The purchaser of the factor of production has a reservation price of $200. If the factor of production is unique, then: there will be no transaction since $200 is greater than $100. a transaction will occur, and the price paid for the factor of production will be $150. a transaction will occur, and the price paid for the factor of production will be $200. a transaction will occur, and the price paid for the factor of production will be $100.

a transaction will occur, and the price paid for the factor of production will be $200.

An increase in the demand for GM automobiles results in: a lower equilibrium price for GM automobiles. an increase in the quantity supplied of GM automobiles. an increase in the supply of GM automobiles. a lower equilibrium quantity of GM automobiles.

an increase in the quantity supplied of GM automobiles.

When a slice of pizza at the student union sold for $2, Moe did not purchase any. When the price fell to $1.75, Moe purchased a slice each day for lunch. Moe's reservation price for a slice of pizza must be: less than $1.75. at least $1.75 but less than $2. exactly $1.75. exactly $2.00.

at least $1.75 but less than $2.

Points that lie beneath the production possibilities curve are: A. unattainable and inefficient B. unattainable but efficient C. attainable but inefficient D. attainable and efficient

attainable but inefficient

Any combination of goods that can be produced with currently available resources is an: A. attainable point. B. efficient point. C. inefficient point. D. attainable and efficient point

attainable point.

The United States was unable to maintain its dominance in the production of televisions because: A. the highly technical skills necessary to produce televisions are greater in other countries. B. the raw materials necessary to build televisions became scarce in the United States. C. the product designs evolved too rapidly for engineers in the United States to keep up. D. automated techniques allowed production to be outsourced to countries with less-skilled workers.

automated techniques allowed production to be outsourced to countries with less-skilled workers.

When the price of an item increases, buyers tend to purchase less of that item: solely because of the substitution effect. solely because of the income effect. because of both the substitution and the income effects. only if the substitution effect and the income effect do not cancel out each other.

because of both the substitution and the income effects.

Consider a graph of a production possibilities curve. If a producer is operating at an inefficient point, then that producer: A. cannot produce more of one good without giving up some of the other good. B. can produce more of one good without producing less of the other good. C. must be at an unattainable point on the production possibilities curve. D. must be specializing in activities for which it has a comparative advantage.

can produce more of one good without producing less of the other good.

An individual has an absolute advantage in producing pizzas if that individual: A. has a lower opportunity cost of producing pizzas than anyone else. B. can produce more pizzas in a given amount of time than anyone else. C. has a higher opportunity cost of producing pizzas than anyone else. D. charges the lowest price for pizzas.

can produce more pizzas in a given amount of time than anyone else.

Suppose you notice that more and more people are driving gas-guzzling cars. Since you drive an economy car, their increased demand for gas: does not affect you. causes companies to charge a lower price, thus benefiting you. causes the price you pay for gas to increase. does not change the price you pay, but reduces the quantity of gas supplied.

causes the price you pay for gas to increase.

As the price of flour (an input into the cookie production process) increases, firms that produce cookies will: increase the supply of cookies. increase the quantity of cookies supplied. decrease the supply of cookies. decrease the quantity of cookies supplied.

decrease the supply of cookies.

Suppose that two recent studies conclude that increased fiber in the diet does not reduce the risk of developing colon cancer as was previously thought. The likely result will be that the: quantity demanded of high-fiber foods will fall. demand for high-fiber foods will decrease. supply of high-fiber foods will increase. price of high-fiber foods will rise.

demand for high-fiber foods will decrease.

In a free market, if the price of a good is below the equilibrium price, then; government needs to set a higher price. suppliers, dissatisfied with growing inventories, will raise the price. demanders, to acquire the good, will bid the price higher. suppliers, dissatisfied with growing inventories, will lower the price.

demanders, to acquire the good, will bid the price higher.

If the absolute value of the slope of the demand curve is 0.25, price is $8 per unit, and quantity demanded is 12 units, then demand for this good is: perfectly elastic. elastic. unit elastic. inelastic.

elastic.

To increase total revenue, firms with ______ demand should lower price, and firms with ______ demand should increase price. elastic; unit elastic; inelastic inelastic; elastic unit; inelastic

elastic; inelastic

In perfectly competitive markets, an implication of entry and exit in response to economic profit and loss is that: firms must earn positive economic profits in the long run. firms will produce the quantity that minimizes average variable costs in the short run. firms will produce the quantity that minimizes average total costs in the long run. market demand is completely elastic.

firms will produce the quantity that minimizes average total costs in the long run.

Larry has a comparative advantage over his classmates in writing term papers if he: A. can write term papers faster than his classmates. B. has an absolute advantage in writing term papers. C. always earns an A on his term papers. D. has a lower opportunity cost of writing term papers than his classmates.

has a lower opportunity cost of writing term papers than his classmates.

The No Cash on the Table Principle asserts that: in equilibrium, a few unexploited opportunities exist. sometimes tips aren't picked up. in disequilibrium, no opportunities exist. in equilibrium, all opportunities have been exploited.

in equilibrium, all opportunities have been exploited.

As the differences in opportunity costs between the U.S. and its trading partners increase, the potential gains from specialization and trade ______. A. increase B. decrease C. stay the same D. become unpredictable

increase

A decrease in the price of pizza will cause a(n): increase in demand. increase in quantity demanded. decrease in quantity demanded. decrease in the number of consumers.

increase in quantity demanded.

If the demand for salad dressing increases when the price of lettuce decreases, the cross-price elasticity of demand between salad dressing and lettuce will be ______ because these two goods are ______. equal to 1; inelastic zero; inferior negative; substitutes negative; complements

negative; complements

If the demand for a good decreases as income decreases, it is a(n): complementary good. normal good. inferior good. substitute good.

normal good.

According to the textbook, the evidence indicates that NAFTA has: A. reduced the wages of skilled workers in the United States. B. reduced the employment of unskilled workers in the United States significantly. C. stopped illegal immigration from Mexico. D. not significantly reduced the employment of unskilled workers in the United States

not significantly reduced the employment of unskilled workers in the United States

Adam Smith believed that the individual pursuit of self-interest: is impossible in a perfectly competitive market. should usually be discouraged. always leads to an efficient outcome. often promotes the broader interests of society.

often promotes the broader interests of society.

If a given production combination is efficient, then it must be: A. above the production possibilities curve. B. on the production possibilities curve. C. either an attainable or unattainable point. D. below the production possibilities curve.

on the production possibilities curve.

Suppose one observes that when the price of peanut butter increases, the demand for jelly increases. One must conclude that: peanut butter and jelly are complements. peanut butter and jelly are substitutes. peanut butter and jelly are normal goods. peanut butter and jelly are inferior goods.

peanut butter and jelly are substitutes.

If the percentage change in quantity demanded is zero for any percentage change in the price of the good, demand is classified as: inelastic. perfectly inelastic. unit elastic. perfectly elastic.

perfectly inelastic.

The price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is elastic. perfectly inelastic. unit elastic. perfectly elastic.

perfectly inelastic.

The price elasticity of demand for a good measures the responsiveness of: demand to a one percent change in price of that good. price to a one percent change in the demand for that good. quantity demanded to a one percent change in price of that good. price to a one percent change in the quantity demanded of that good.

quantity demanded to a one percent change in price of that good.

If the demand for electricity is inelastic, then if the local utility wants to increase its total revenue, it should _______ its price. lower raise not change frequently change

raise

You are the Minister of Trade for a small island country with the above annual PPC: You are negotiating a trade agreement with a neighboring island with the above annual PPC: If the other island's delegate offers to give you 2 fish for every 1 coconut you give them, you will: A. accept their offer because you do not have the comparative advantage in fish. B. refuse their offer because the opportunity cost to you of a coconut is more than 2 fish. C. accept their offer because you do not have an absolute advantage in fish. D. refuse their offer because the opportunity cost to you of a coconut is less than 2 fish.

refuse their offer because the opportunity cost to you of a coconut is more than 2 fish.

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 can also be called her: marginal revenue. equilibrium price. reservation price. producers surplus.

reservation price.

Assume that the production technology required to produce goods X and Y are very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will: intensify its production of good X. shift into producing good Y. anticipate a price increase for good X. charge a higher price for good X.

shift into producing good Y.

The demand curve illustrates the fact that consumers: tend to purchase more of a good as its price rises. purchase name brand products more frequently than generic products. tend to purchase more of a good as its price falls. purchase more of a good as their incomes rise.

tend to purchase more of a good as its price falls.

The price elasticity of demand is a measure of: the change in quantity demanded of a good that results from a change in its price. the change in price of a good that results from a change in its quantity demanded. the demand for a good. how consumers respond to excess demand.

the change in quantity demanded of a good that results from a change in its price.

The owner of a pizza shop observes that when she raises the price of a large pizza, her total revenue decreases, and when she lowers the price of a large pizza, her total revenue increases. This suggests that: pizza lovers act irrationally. the demand for her large pizzas is elastic with respect to price. there are few good substitutes for a large pizza. the demand for her large pizzas is inelastic with respect to price.

the demand for her large pizzas is elastic with respect to price.

Suppose one could either rent a car or take a train to travel to Chicago from Washington, D.C. If the price of train tickets increases: the demand for train tickets will increase. the demand for rental cars will increase. the demand for train tickets will decrease. the demand for rental cars will decrease.

the demand for rental cars will increase.

When more firms enter an industry: the amount produced by each of the new firms will be greater than the amount produced by each of the original firms. the industry supply curve will shift left. the amount produced by each of the new firms will be less than the amount produced by each of the original firms. the industry supply curve will shift right.

the industry supply curve will shift right.

Suppose that the price of doughnuts decreases and that doughnut-holes are a by-product of producing doughnuts. One would expect: the supply of doughnuts to decrease. the quantity supplied of doughnuts to decrease. the supply of doughnut-holes to increase. the quantity supplied of doughnut-holes to increase.

the quantity supplied of doughnuts to decrease.

A seller's reservation price is generally equal to: the buyer's reservation price. the seller's opportunity cost. the seller's marginal benefit. the market price.

the seller's opportunity cost.

Efficiency occurs when: a market is in equilibrium. the socially optimal quantity of goods and services is being produced. the individually rational quantity of goods and services is being produced. the government does not interfere with market prices.

the socially optimal quantity of goods and services is being produced.

As coffee becomes more expensive, Joe starts drinking tea, and therefore quantity demanded for coffee decreases. This is called: the income effect. the change in equilibrium. the substitution effect. a shift in the demand curve

the substitution effect.

Suppose the local slaughterhouse gives off an unpleasant stench. The price of meat would then be _______ because not all of the _________ are accounted for in the marketplace. too high; benefits too low; benefits too high; costs too low; costs

too low; costs

Points that lie outside the production possibilities curve are ______, and points that lie inside the production possibilities curve are ______. A. efficient; inefficient B. inefficient; efficient C. unattainable; attainable D. attainable; unattainable

unattainable; attainable

One concern regarding the North American Free Trade Agreement (NAFTA) was that it would lead: A. the total value of goods and services produced by the United States to fall. B. wages in Mexico to rise. C. highly skilled workers in the United States to lose their jobs. D. unskilled workers in the United States to lose their jobs.

unskilled workers in the United States to lose their jobs.

Supply curves are generally _______ sloping because _______________. downward; more consumers will buy the good if the price falls. upward; of the principle of increasing opportunity costs. downward; it is less expensive to mass-produce goods. upward; of inflation.

upward; of the principle of increasing opportunity costs.

Last summer, real estate prices in your town soared. You started noticing more "For Sale" signs in your neighbors' yards. You conclude that: people don't like to live in your neighborhood anymore. when housing prices rose, they started to exceed some of your neighbors' reservation prices. the demand curve for housing in your town has shifted to the left while supply remained constant. the supply curve for housing in your town has shifted to the right while demand has remained constant.

when housing prices rose, they started to exceed some of your neighbors' reservation prices.

For two goods X and Y to be classified as substitutes, it must be the case that: X and Y are identical. consumers tend to purchase both items. when the price of X rises, the demand for Y decreases. when the price of X rises, the demand for Y increases.

when the price of X rises, the demand for Y increases.

A regulated maximum price that is above the equilibrium price: will lead to black markets. will have no effect on the market. will lead to excess supply in the market. will lead to excess demand in the market.

will have no effect on the market.