ECN 212
True or False A demand schedule relates quantity demanded to quantity supplied, other things being constant.
False
True or False A graphical representation of a demand curve is called a demand schedule.
False
True or False A price system will tend to overallocate resources to the production of free goods, due to the free-rider problem.
False
True or False Agricultural surpluses arise when governments put price ceilings on such goods
False
True or False An increase in price leads to a leftward shift in demand and a rightward shift in supply.
False
True or False An increase in the price of MP3 players causes a rise in the supply of MP3 players.
False
True or False At any given moment in time, it is impossible for an economy to be inside its production possibilities curve
False
True or False Because economics is a science, economists do not make normative statements.
False
True or False Buyers are concerned with absolute, not relative, prices.
False
True or False Deciding what is a government-sponsored good and what is a government-inhibited good is easily done and does not require value judgments.
False
True or False Economics is the study of how people think about economic phenomena.
False
True or False Economists' definition of self-interest includes only the pursuit of material goods.
False
True or False For most activities no opportunity cost exists.
False
True or False Government goods are produced solely in the public sector.
False
True or False Governments provide a legal system, but this important function is not considered an economic function.
False
True or False Households cannot be thought of as producers.
False
True or False If a production possibilities curve is linear, the opportunity cost of producing additional units of a good rises.
False
True or False If both supply and demand shift to the right, then the equilibrium price and equilibrium quantity are indeterminate.
False
True or False If market demand and supply curves have their normal shapes, then the difference between the market price of a health-care service covered by Medicare and the price that Medicare recipients actually pay is equal to the per-unit Medicare subsidy.
False
True or False If markets are flexible and no market restrictions exist, then surpluses and shortages will not occur, even in the short run.
False
True or False If supply shifts to the left, given demand, then the equilibrium price and the equilibrium quantity will rise.
False
True or False If the price of tennis racquets rises, the demand for tennis balls will tend to rise also.
False
True or False If the price to a specific user is zero, the good must be a noneconomic good
False
True or False If the supply of good A increases relative to its demand, then good A is now more scarce, and its relative price will rise.
False
True or False In recent years, decreases in educational subsidies have generally widened the difference between the cost of the last unit of services provided and the marginal value of the services to parents and students.
False
True or False In the U.S. economy the government plays only a minor role in resource allocation, because the country is capitalistic.
False
True or False It is justifiable to criticize theories on the realism of the assumptions employed.
False
True or False Minimum wage laws are a form of price ceiling.
False
True or False Most individuals' needs exceed their wants.
False
True or False One way to help correct for a negative externality is to tax the good in question, because that will cause the price of the good to fall.
False
True or False People have little incentive to specialize in jobs for which they have a comparative advantage.
False
True or False Rent controls help the poor who are looking for apartments, because rents are lower
False
True or False Scarcity exists in the market sector, but not in the public sector.
False
True or False The best way for the government to prevent the underallocation of resources to production of vaccines against diseases is to require producers to set the price of vaccines below the equilibrium price.
False
True or False The rationality assumption is that individuals attempt, quite consciously, to make rational economic decisions, and will admit to it.
False
True or False The three fundamental economic questions are as follows: (a) Who should decide what to produce, (b) what methods ought to be utilized in production, and (c) who should receive the items that are produced?
False
True or False When economists attempt to predict the number of Web servers that an Internet bank will utilize, they are studying macroeconomics.
False
The ____________________ of good A is the highest-valued alternative that must be sacrificed to attain it.
Opportunity cost
True or False A change in the quantity of cigarettes demanded results from a change in the price of cigarettes.
True
True or False A statement of fact is an example of a positive statement.
True
True or False As producers increase output in the short run, the cost of additional units of output tends to rise.
True
True or False Because resources are scarce, the goods that they produce are also scarce.
True
True or False Black markets, in effect, cause prices to rise for certain buyers.
True
True or False Economic growth shifts the production possibilities curve outward.
True
True or False Economists maintain that people respond in a predictable way to economic incentives.
True
True or False Evidence indicates that developing new technologies, specializing, and engaging in trade helped Homo sapiens win out over Neanderthals.
True
True or False If a negative externality exists, buyers and sellers are not faced with the true opportunity costs of their actions.
True
True or False If a positive externality exists when good A is produced, a price system will underallocate resources into the production of good A.
True
True or False If demand shifts to the left, given supply, then the equilibrium price and the equilibrium quantity will fall.
True
True or False If externalities, or spillovers, exist, then a price system misallocates resources, so that inefficiency exists.
True
True or False If price is below the equilibrium price, a shortage exists.
True
True or False If the price of butter rises, the demand for margarine will rise.
True
True or False If the published price is constant, but it takes consumers longer to wait in lines, the total price has really risen.
True
True or False If third parties are hurt by the production of good B and they are not compensated, then too many resources have been allocated to industry B.
True
True or False Macroeconomics deals with aggregates, or totals, of economic variables.
True
True or False Not including any administration costs, the direct expense that taxpayers incur in paying the government's share of the total costs of a particular type of care equals the per-unit subsidy that the government pays times the quantity of care demanded under the subsidy.
True
True or False One aim of antitrust legislation is the promotion of competition.
True
True or False The opportunity cost to a motorist of the time that she is stuck in traffic is the next-highest value of the equivalent amount of time.
True
True or False The price that Medicare patients pay for covered care that they receive is lower than the market price of that care.
True
True or False The price that the supplier of a service covered by Medicare receives is higher than the market price of providing that service.
True
People tend to specialize in those activities for which they have (a comparative, an absolute) advantage.
a comparative
Reducing government subsidies paid to public schools causes (a decrease, an increase) in the quantity of educational services provided by these schools and (a decrease, an increase) in the quantity of educational services desired by students and their parents.
a decrease; a decrease
If Ms. Ayres loves good A, she can convey the intensity of her wants if good A is a. a private good. b. a public good. c. not subject to the exclusion principle. d. expensive.
a. a private good.
If the price of milk rises, other things being constant, a. buyers will drink less milk. b. buyers will substitute milk for other beverages. c. the demand for milk will fall. d. the demand for cola drinks will fall.
a. buyers will drink less milk.
According to the rationality assumption, people a. do not intentionally make decisions that would leave them worse off. b. do not ever take into account the interests or well-being of others. c. can never consider each of the most relevant alternatives. d. use rules of thumb to make choices.
a. do not intentionally make decisions that would leave them worse off.
The exclusion principle a. does not work for public goods. b. does not work for private goods. c. causes positive externalities. d. makes it easy to assess user fees on true public goods.
a. does not work for public goods.
Which one of the following is not an economic function of government? a. income redistribution b. providing a legal system c. ensuring economywide stability d. promoting competition
a. income redistribution
When a nation expands its capital stock, it is usually true that a. it must forego output of some consumer goods in the present. b. the human capital stock must decline. c. fewer consumer goods will be available in the future. d. no opportunity cost exists for doing so.
a. it must forego output of some consumer goods in the present.
If the demand for good A rises relative to its supply, and markets are price flexible, then a. no shortage of A can exist in the long run. b. no shortage of A can exist in the short run. c. the published price of A remains constant, but its total price falls. d. the published price of A remains constant, but its total price rises.
a. no shortage of A can exist in the long run.
As is true of a road map showing how a traveler can move about a geographic region, a model of economic behavior typically a. omits trivial details and emphasizes factors most relevant to the problem under consideration. b. makes no simplifying assumptions, so that every feature of a problem is taken into account. c. must be rejected if it leaves out some information, even if it makes correct predictions. d. includes each and every element of a problem confronting an individual or group.
a. omits trivial details and emphasizes factors most relevant to the problem under consideration.
Black markets may arise if a. price ceilings exist. b. price floors exist. c. governments do not intervene in the market. d. equilibrium price is too low.
a. price ceilings exist.
When a demand curve is derived, a. quantity is in constant-quality units. b. the price of the good is held constant. c. money income changes. d. consumer tastes change.
a. quantity is in constant-quality units.
If demand shifts to the right (given supply), then equilibrium a. quantity will rise. b. price is indeterminate. c. price and equilibrium quantity are indeterminate. d. price will fall.
a. quantity will rise.
If supply shifts to the right (given demand), then equilibrium a. quantity will rise. b. price will rise. c. price and equilibrium quantity will fall. d. price and equilibrium quantity rises
a. quantity will rise.
Which one of the following is true of both market and collective decision making? Within both contexts, a. resources are scarce. b. people face identical incentive structures. c. production and allocation decisions arise from majority rule. d. production and allocation decisions arise from proportional rule.
a. resources are scarce.
If the price of good A rises and the demand for good B rises, then A and B are a. substitutes. b. complements. c. not related goods. d. not scarce goods.
a. substitutes.
When the production possibilities curve is bowed outward, it is because a. the additional cost of producing a good rises. b. of the law of decreasing additional cost. c. all resources are equally suited to the production of any good. d. All of the above.
a. the additional cost of producing a good rises.
Which one of the following areas of study is concerned, primarily, with microeconomics? a. the personal computer industry b. inflation c. the national unemployment rate d. national income determination
a. the personal computer industry
The rationality assumption is that individuals (believe, act as if ) they are rational.
act as if
Economists maintain that incentives (are, are not) important to decision making.
are
Which one of the following is a positive economic statement? a. Full employment policies should be pursued. b. If minimum wage rates rise, then unemployment will rise. c. We should take from the rich and give to the poor. d. The government should help the homeless
b. If minimum wage rates rise, then unemployment will rise.
Which statement concerning a production possibilities curve is not true? a. A trade-off exists along such a curve. b. It is usually linear. c. Points inside it indicate inefficiency. d. A point outside it is currently impossible to attain.
b. It is usually linear.
Ms. Boulware is the best lawyer and the best secretary in town. a. She has a comparative advantage in both jobs. b. She has an absolute advantage in both jobs. c. She has a comparative advantage in being a secretary. d. All of the above.
b. She has an absolute advantage in both jobs.
Which one of the following is NOT one of the three fundamental economic questions? a. How will items be produced? b. Who deserves produced items? c. For whom will items be produced? d. What and how much will be produced?
b. Who deserves produced items?
Suppose that the government has been paying a fixed per-unit subsidy for a health-care service covered by Medicare. Then officials who administer the program tell patients and doctors and other health-care providers that they plan to cut the per-unit subsidy. Other things being equal, the result will be a. a rise in the market price and a decline in the equilibrium quantity in the market for the service. b. a rise in the price paid by each Medicare recipient, and a reduction in the quantity of the service demanded and supplied. c. a rise in the price received by each health-care supplier, and an increase in the quantity of the service demanded and supplied. d. a fall in the price received by each health-care supplier, and an increase in the quantity of the service demanded and supplied.
b. a rise in the price paid by each Medicare recipient, and a reduction in the quantity of the service demanded and supplied.
Which one of the following will lead to a rise in supply? a. an increase in the price of the good in question b. a technological improvement in the production of the good in question c. an increase in the price of labor used to produce the good in question d. All of the above.
b. a technological improvement in the production of the good in question
Which one of the following probably will not lead to a fall in the demand for hamburgers? a. a decrease in income, if hamburgers are a normal good b. an expectation that the price of hamburgers will rise in the future c. a decrease in the price of hot dogs d. a change in tastes away from hamburgers
b. an expectation that the price of hamburgers will rise in the future
Which one of the following words does not belong with the others? a. opportunity cost b. economic "bad" c. scarcity d. economic good
b. economic "bad"
The free-rider problem exists a. for private goods. b. for goods that must be consumed collectively. c. only if people can be excluded from consumption. d. All of the above.
b. for goods that must be consumed collectively.
If the demand for good A falls relative to its supply, then a. good A is now relatively more scarce. b. good A is now relatively less scarce. c. the relative price of good A will rise. d. the total price of good A will rise, even if A is not price flexible.
b. good A is now relatively less scarce.
Economists maintain that Ms. Chung will usually make decisions that promote the interests of a. her colleagues at work. b. herself. c. her class. d. her race.
b. herself.
Which one of the following is not a characteristic of public goods? a. indivisibility b. high extra cost to additional users c. exclusion principle does not work easily d. difficult to determine how each individual benefits from public goods
b. high extra cost to additional users
Economics a. is a natural science. b. is concerned with how people respond to incentives. c. is unconcerned with value judgments. d. deals with assumptions and therefore is unrealistic.
b. is concerned with how people respond to incentives.
If both supply and demand shift to the left, then equilibrium a. price is indeterminate and equilibrium quantity rises. b. price is indeterminate and equilibrium quantity falls. c. price falls and equilibrium quantity falls. d. price falls and equilibrium quantity is indeterminate.
b. price is indeterminate and equilibrium quantity falls.
If markets are free and prices are flexible, a. equilibrium price cannot be established. b. shortages and surpluses eventually disappear. c. shortages and surpluses cannot arise. d. equilibrium quantity cannot be established.
b. shortages and surpluses eventually disappear.
A demand schedule a. relates price to quantity supplied. b. when graphed, is a demand curve. c. cannot change. d. shows a direct relationship between price and quantity demanded.
b. when graphed, is a demand curve.
Economists define self-interest (narrowly, broadly).
broadly
Which one of the following is a normative economic statement? a. If price rises, people will buy less. b. If price rises, people will buy more. c. If price rises, the poor will be injured. Therefore, price should not be permitted to rise. d. If price rises, people will buy less. Therefore, we ought to observe that quantity demanded falls.
c. If price rises, the poor will be injured. Therefore, price should not be permitted to rise.
From 2:00 to 4:00 on a Thursday afternoon, Mr. Stapleton, a fast-food worker who earns the minimum wage, waits while his daughter is examined at a pediatrician's office. Ms. Rodriguez, a successful marketing consultant who normally charges a fee of $100 per hour and who recently has turned down several potential clients, spends exactly the same amount of time waiting for her own daughter to be examined. The pediatrician charges Mr. Stapleton $100 for the office visit. Ms. Rodriguez also pays the pediatrician $100. We may conclude that during this two-hour period, a. both parents incurred identical child-raising costs. b. from an economic standpoint, it was irrational for Ms. Rodriguez to wait while the pediatrician examined her child. c. Ms. Rodriguez incurred a higher child-raising cost, because she otherwise could have been earning consulting fees during this time. d. Mr. Stapleton incurred a higher child-raising cost, because he otherwise could have been looking for a higher-paying job during this time.
c. Ms. Rodriguez incurred a higher child-raising cost, because she otherwise could have been earning consulting fees during this time.
Which one of the following will not occur if the price of widescreen digital televisions falls, other things being constant? a. The demand for digital cable services will increase. b. People will substitute widescreen digital televisions for standard televisions. c. The demand for standard televisions will rise. d. The quantity of widescreen digital televisions demanded will increase.
c. The demand for standard televisions will rise.
Which one of the following is true of government goods? a. They are always produced within the public sector. b. They are always produced within the private sector. c. They are provided free of charge. d. They have no opportunity cost.
c. They are provided free of charge.
Suppose that, until this year, a health-care service was not covered by Medicare. Recently, however, the government has extended Medicare coverage to this service and has started paying a fixed per-unit subsidy to providers of the service. Other things being equal, the result will be a. a fall in the market price and an increase in the equilibrium quantity in the market for the service. b. a rise in the price paid by each Medicare recipient, and a reduction in the quantity of the service demanded and supplied. c. a rise in the price received by each health-care supplier, and an increase in the quantity of the service demanded and supplied. d. a fall in the price received by each health-care supplier, and an increase in the quantity of the service demanded and supplied.
c. a rise in the price received by each health-care supplier, and an increase in the quantity of the service demanded and supplied.
Economics is a. a natural science. b. nonscientific. c. a social science. d. usually studied through lab experiments.
c. a social science.
Normative economic statements a. are testable hypotheses. b. are value-free. c. are subjective, value judgments. d. can be scientifically established.
c. are subjective, value judgments.
Which one of the following is not considered to be "land?" a. bodies of water b. fertility of soil c. capital d. climate
c. capital
A price system will misallocate resources if a. much income inequality exists. b. government-inhibited goods are produced. c. externalities exist. d. All of the above.
c. externalities exist.
Which one of the following will properly correct a negative externality that results from producing good B? a. subsidizing the production of good B b. letting the price system determine the price and output of good B c. forcing buyers and sellers of good B to pay the true opportunity costs of their actions d. banning the production of good B
c. forcing buyers and sellers of good B to pay the true opportunity costs of their actions
Which one of the following does not belong with the others? a. positive externality b. negative externality c. government-inhibited good d. public good
c. government-inhibited good
Macroeconomic analysis deals with a. the personal computer industry. b. how individuals respond to an increase in the price of gasoline. c. inflation. d. how a change in the price of energy affects a family.
c. inflation.
Rent controls a. are a form of price floor. b. help the homeless who need apartments. c. make tenants less mobile. d. reduce litigation in society.
c. make tenants less mobile.
If income falls and the demand for widescreen digital televisions falls, then widescreen digital televisions are a(n) a. substitute good. b. complement good. c. normal good. d. inferior good.
c. normal good.
Prolonged shortages arise if a. demand increases relative to supply. b. price floors are set by governments. c. prices are not allowed to rise to equilibrium. d. buyers are allowed to compete for goods.
c. prices are not allowed to rise to equilibrium.
If a surplus exists at some price, then a. sellers have an incentive to raise the price. b. buyers have an incentive to offer a higher price. c. sellers cannot sell all they wish to at that price. d. seller inventories are falling.
c. sellers cannot sell all they wish to at that price.
If the demand for satellite Internet access services increases, with a given supply, then a. the supply of satellite Internet access services will rise because price rises. b. the equilibrium price of satellite Internet access services will fall, and the equilibrium quantity will rise. c. the equilibrium quantity and the equilibrium price of satellite Internet access services will rise. d. the quantity supplied of satellite Internet access services will decrease.
c. the equilibrium quantity and the equilibrium price of satellite Internet access services will rise.
If the supply of gasoline rises, with a given demand, then a. the relative price of gasoline will rise. b. the equilibrium price of gasoline will rise. c. the equilibrium quantity of gasoline will increase. d. the equilibrium price and equilibrium quantity of gasoline will increase.
c. the equilibrium quantity of gasoline will increase.
Market failure exists if a. Mr. Smith cannot purchase watermelons in his town. b. buyers and sellers must pay the true opportunity costs of their actions. c. third parties are injured and are not compensated. d. the government must provide government-sponsored goods.
c. third parties are injured and are not compensated.
Rent control is a form of price (floor, ceiling). Rent control (increases, reduces) the future supply of apartment construction, (increases, reduces) tenant mobility, (improves, causes a deterioration in) the quality of the existing stock of apartments, and hurts _________________________.
ceiling; reduces; reduces; causes a deterioration in; landlords and low income apartment hunters
If governments place price (floors, ceilings) on goods, then black markets might emerge.
ceilings
Because it is impossible to have all that we want, people are forced to make __________________.
choices
Economics is the study of how people make _____________________________ to satisfy their __________________.
choices; wants
When people choose jobs that maximize their income, they are specializing according to their _________________ advantage.
comparative
Digital music downloads and iPod music players are (substitutes, complements). If the price of iPod music players rises, then the demand for digital music downloads will ________________________.
complements; fall
Which one of the following can influence how a society rations a specific good? a. price system that rations to the highest bidder b. political power c. religion d. All of the above
d. All of the above
A simultaneous increase in the market clearing price of cheese and decrease in the equilibrium quantity of cheese could result from a. a higher price of beef that induces farmers to sell dairy cows for use in beef production, with the milk produced by dairy cows being a key input in cheese production. b. a higher price of hormones used to stimulate production of milk in dairy cows, with milk being a key input in the production of cheese. c. any factor that reduces the supply of cheese. d. All of the above.
d. All of the above.
An economic model is justifiably criticized if a. its assumptions are not realistic. b. it cannot be tested in a controlled, laboratory experiment. c. it fails to predict. d. All of the above.
d. All of the above.
Because of scarcity a. people are forced to make choices. b. opportunity costs exist. c. people face trade-offs. d. All of the above.
d. All of the above.
Because resources are scarce, a. buyers compete with buyers for outputs. b. there must be some method for rationing goods. c. people cannot have all they want at a zero price. d. All of the above.
d. All of the above.
Economic models a. use unrealistic assumptions. b. are seldom tested in laboratories. c. are concerned with how people behave, not with how they think. d. All of the above.
d. All of the above.
If a shortage exists at some price, then a. sellers can sell all they desire to sell at that price. b. sellers have an incentive to raise the price. c. buyers cannot get all they want at that price. d. All of the above.
d. All of the above.
If an effective minimum wage is imposed, then a. more workers will be unable to find jobs. b. the quantity of labor demanded will fall. c. some workers will move to sectors not covered by minimum wages. d. All of the above.
d. All of the above.
If the demand for good A rises relative to its supply, and markets are price inflexible, then a. a shortage can exist in the short run. b. a shortage can exist in the long run. c. the published price of A might remain constant, but its total price rises. d. All of the above.
d. All of the above.
If the demand for good B rises relative to its supply, then a. good B is now relatively more scarce. b. the relative price of good B will rise. c. the total price of good B will rise, even if good B is price inflexible. d. All of the above.
d. All of the above.
Prolonged agricultural surpluses can arise if governments a. set price above equilibrium. b. institute price floors, or price supports. c. purchase the excess supply. d. All of the above.
d. All of the above.
Wants include desires for a. material possessions. b. love. c. power. d. All of the above.
d. All of the above.
When nations and individuals specialize, a. overall living standards rise. b. trade and exchange increase. c. people become more vulnerable to changes in tastes and technology. d. All of the above.
d. All of the above.
In future years, the number of people covered by Medicare will increase, so the demand for each covered health-care service will rise. Suppose that the per-unit subsidy that the government pays for each covered service remains unchanged. Other things being equal, which one of the following will not occur as a result? a. The market price of the service will increase, and the equilibrium quantity in the market for the service will rise. b. There will be a rise in the price paid by each Medicare recipient, and there will be an increase in the quantity of the service demanded. c. There will be a rise in the price received by each health-care supplier, and there will be an increase in the quantity of the service supplied. d. Because the per-unit subsidy paid by the government remains unchanged, the total expense incurred by taxpayers will remain unaffected.
d. Because the per-unit subsidy paid by the government remains unchanged, the total expense incurred by taxpayers will remain unaffected.
Which one of the following is a normative economic statement? a. When more death-penalty sentences are reduced to life imprisonment, the homicide rate increases. b. An increase in the rate of executions is associated with a fall in homicides. c. Improved prison conditions increase the disincentive effects of capital punishment. d. Capital punishment is a morally wrong way to try to deter homicides.
d. Capital punishment is a morally wrong way to try to deter homicides.
Which one of the following statements concerning externalities is true? a. If a positive externality exists for good A, A will be overproduced by a price system. b. If externalities exist, then resources will be allocated efficiently. c. Efficiency may be improved if the government taxes goods for which a positive externality exists. d. The output of goods for which a positive externality exists is too low, from society's point of view.
d. The output of goods for which a positive externality exists is too low, from society's point of view.
Consider a city that establishes a law prohibiting the use of lawn sprinklers and limiting showers to 4 minutes. Which one of the following statements is probably true in this city? a. A surplus of water exists. b. The price of water is too high. c. A shortage of water exists regardless of how high its price got. d. The price of water is below the equilibrium price.
d. The price of water is below the equilibrium price.
Government-sponsored and government-inhibited goods a. are examples of public goods. b. are examples of externalities. c. indicate market failure. d. are not easily classified.
d. are not easily classified.
Government-inhibited goods are goods for which society wants to (decrease, increase) production.
decrease
A(n) _______________________________ relates various possible prices to the quantities demanded at each price, and a(n) _____________________________ relates various prices to the quantities supplied at each price.
demand curve or schedule; supply curve or schedule
If at a zero price quantity demanded exceeds quantity supplied for a good, that good is a(n) _____________________. If at a zero price quantity supplied exceeds quantity demanded for a good, that good is a(n) _______________________.
economic good; economic "bad"
At the intersection of the supply and demand curves, the quantity supplied equals the quantity demanded, and at that price a(n) _________________________________ exists. At a price above that intersection, quantity supplied exceeds quantity demanded and a(n) _______________ exists. At a price below that intersection, quantity demanded exceeds quantity supplied, and a(n) ___________________________ exists.
equilibrium; surplus; shortage
Analogy: An excess quantity supplied is to a surplus as a(n) ________________________________ is to a shortage.
excess quantity demanded
In contrast to goods sold in private markets, government goods are not (scarce, explicitly priced).
explicitly priced
Positive and negative externalities are examples of market _________________________.
failure
If demand shifts to the left, given supply, then the equilibrium price will (rise, fall) and the equilibrium quantity will ______________.
fall; fall
If supply shifts to the right, given demand, then the equilibrium price will ___________________ and the equilibrium quantity will _________________________.
fall; rise
If there are disputes in an economic arena, the ______________________ often acts as a "referee" to help settle the dispute.
goverment
Because the Medicare program pays a per-unit subsidy for health-care expenses of people covered by the program, the price that providers receive for health-care services is (greater than, equal to, less than) the market price, and the quantity of health-care services they are willing to supply is (greater than, equal to, less than) the equilibrium quantity
greater than; greater than
Economists maintain that a member of a group usually attempts to make decisions that are in (her own, the group's) interest.
her own
When governments provide subsidies to providers of educational services, the result is that the cost of the last unit of services provided is (lower, higher) than the marginal value of the services to parents and students.
higher
When the other determinants of demand change, the entire demand curve shifts. The five major ceteris paribus conditions affecting demand are __________________________________, ________________________, __________________, _________________________________, and _____________________.
income; tastes and preferences; prices of related goods; expectations about future relative prices; number of buyers
An increase in the number of people covered by Medicare will tend to cause the demand for covered health-care services to __________________, thereby causing a(n) _____________________ in both the equilibrium and actual quantities of the service demanded and supplied.
increase; increase
The law of supply relates prices to quantities supplied. In general, as price rises, quantity supplied _______________. Therefore (a direct, an inverse) relationship exists, and the supply curve is (positively, negatively) sloped.
increases; direct; positively
Economists take the (individual, group) as the unit of analysis.
individual
Microeconomics deals with (individual units, the whole economy).
individual units
Public goods have four distinguishing characteristics. They are usually _____________________. Public goods can be used by more people at _____________ additional cost. Additional users (do, do not) deprive others of the services of a public good. It is very (easy, difficult) to charge individuals based on how much they used the public good.
indivisible; zero; do not; difficult
If externalities are an important result of an economic activity, then the price system is (inefficient, efficient).
inefficent
If an economy is inefficient, its actual output combination will lie (inside, outside) the production possibilities curve.
inside
There is (a direct, an inverse) relationship between price and quantity demanded, and demand curves will be (positively, negatively) sloped.
inverse; negatively
If both demand and supply shift to the left, then the equilibrium price (will rise, will fall, is indeterminate), and the equilibrium quantity (will rise, will fall, is indeterminate).
is indeterminate; will fall
If both demand and supply shift to the right, then the equilibrium price (will rise, will fall, is indeterminate) and the equilibrium quantity (will rise, will fall, is indeterminate).
is indeterminate; will rise
The factors of production include ____________________, _______________________, _______________________, ____________________, and ___________________.
land; labor; physical capital; human capital; entrepreneurship
By prohibiting the sale and use of tobacco products, the government would cause the supply of cigarettes to shift to the (left, right), make cigarettes (more, less) scarce, and cause their relative price to (rise, fall
left; more; rise
Because the Medicare program pays a per-unit subsidy for health-care expenses of people covered by the program, the price that they pay for health-care services is (greater than, equal to, less than) the market price, and the quantity of health-care services that they desire to consume is (greater than, equal to, less than) the equilibrium quantity.
less than; greater than
If the opportunity cost of additional units of a good remains constant, the production possibilities curve will be (linear, bowed outward). If the opportunity cost of additional units of a good rises, the production possibilities curve will be (linear, bowed outward).
linear; bowed outward
If a positive externality exists for good B, a price system will produce too ___________________ of good B.
little
The law of demand states that, other things being equal, more items are purchased at a (lower, higher) price and fewer are purchased at a(n) _____________ price.
lower; higher
(Macroeconomics, Microeconomics) studies the causes and effects of inflation.
macroeconomics
A nation's unemployment level is analyzed in (microeconomics, macroeconomics).
macroeconomics
In the government sector, decisions concerning what goods to produce are determined by (majority, proportional) rule.
majority
The supply curve is positively sloped because as price rises, producers have an incentive to produce (less, more).
more
If the demand for a good rises relative to its supply, that good becomes (less scarce, more scarce) and its relative price will (rise, fall). This leads to (a decrease, an increase) in the quantity of the good supplied by producers of the item.
more scarce; rise; an increase
If the demand for good A or resource A rises relative to its supply, A has become relatively (less scarce, more scarce) and its relative price will (rise, fall). If the demand for good B or resource B falls relative to its supply, then B has become relatively __________________________, and its relative price will __________________.
more scarce; rise; less scarce; fall
A change in quantity demanded is a (movement along, shift in) the demand curve. A change in demand is a(n) _______________________________ the demand curve.
movement along; shift in
Behavioral economics is an approach that assumes that individuals are (fully, nearly) rational.
nearly
Pollution is an example of a (negative, positive) externality.
negative
A free rider has an incentive (to pay, not to pay) for a public good.
not to pay
The ceteris paribus assumption permits us to consider (one thing at a time, everything at once).
ont thing at a time
When there are spillover costs, a price system will (underallocate, overallocate) resources to the production of the good in question.
overallocate
Economic statements that are testable and are of an "if/then" nature are (positive, normative).
positive
If third parties benefit from a transaction, then (negative, positive) externalities exist, and the price system will allocate resources (inefficiently, efficiently)
positive; inefficiently
By convention, economists plot (price, quantity) on the vertical axis and (price, quantity) on the horizontal axis.
price; quantity
In a price system, _________ signal to everyone which resources are relatively scarce and which resources are relatively abundant.
prices
When the determinants of supply change, the entire supply curve will shift. Five major determinants of supply are __________________, __________________, _________________________, ______________, and __________________.
prices of inputs; technology; taxes and subsidies; price expectations; number of firms in industry
Antitrust legislation, in theory, is supposed to (decrease, promote) competition in the private sector.
promote
The five economic functions of government in our capitalistic system are _____________________, ________________________, ________________________, ________________________, and ________________________.
providing a legal system; promoting competition; correcting externalities; providing public goods; ensuring economywide stability
Import quotas, licensing arrangements, and outright bans on specific goods are forms of government (price, quantity) restrictions.
quantity
An import quota tends to (lower, raise) the price to consumers.
raise
Price performs a(n) __________________________ function. Inputs or outputs go to the __________________________ bidders, if people are free to exchange voluntarily in markets. If such economic freedoms do not exist, then other (price, nonprice) determinants will allocate goods and services.
rationing; highest; nonprice
A government can correct negative externalities by imposing taxes and by _________________ the industry or firms in question.
regulating
A rise in demand causes the demand curve to shift to the (left, right). An increase in quantity demanded occurs when there is a movement (up, down) the demand curve.
right; down
Because specialized resources are more suited to specific tasks, the opportunity cost of producing additional units of a specific good will (rise, fall).
rise
If the demand for Internet access services rises, given the supply, then the equilibrium price of Internet access services will (rise, fall) and the equilibrium quantity of Internet access services purchased will __________.
rise; rise
If the published price of good A remains constant, but its quality falls, then its relative price has actually (risen, fallen). If the published price of good A remains constant, but people have to wait in line to get it, then the relative price of good A has actually _______________________, because people have an opportunity cost for their ___________________________.
risen; risen; time
Price controls that put a price ceiling on goods and services create (surpluses, shortages). Price floors create (surpluses, shortages).
shortages; surpluses
Economic models are (simplified, realistic) representations of the real world.
simplified
Economics is a (natural, social) science.
social
A government can correct positive externalities by _________________, _________________, and ___________________________.
subsidizing production; financing production; regulation
When the price of rewriteable DVD drives rises, the demand for flash memory drives rises. Rewriteable DVD drives and flash memory drives are (substitutes, complements).
substitutes
Ceteris paribus, payment of bonuses to physicians for pushing preventive health care gives physicians an incentive to (treat only actual illnesses, suggest treatments to deter illnesses).
suggest treatments to deter illnesses
If governments put price floors on agricultural goods, a (shortage, surplus) will result.
surplus
If Ms. Johnson buys an automobile from Toyota, those people not directly involved in the transaction are considered _________________________.
third parties
Resources are scarce. Therefore, we cannot have all we want at a (zero, positive) price and there will be various ways in which people will ____________________ for resources.
zero; compete
Many government, or political, goods are provided to consumers at a (zero, positive) price. The opportunity cost to society of providing government goods is (zero, positive).
zero; positive