ECO 151 SURVEY OF ECONOMICS MINE MODULE 2 Ch. 3 Supply and Demand Ch. 4 Consumer Demand Ch. 5 Supply Decisions

On average, if a person spends $50,000 per year,_____ is spent on housing. Multiple choice question. $16,500 $0.33 $33,000 $3,300

$16,500

On average, if a person spends $100,000 per year, ________ is spent on housing. $0.33 $33,000 $16,500 $3,300 old_fig 4.1(6681770e).jpg Text Alternative The data (in cents) is as follows: Housing (shelter, furnishings, upkeep), 33. Transportation, 16. Food, 13. Clothing, 3. Health care, 8. Entertainment, 5. Other goods and services, 10. Insurance and pensions, 12.

$33,000

19. Jeans Production Rate of Output Total Cost (Jeans per day) 0 $60.00 10 $102.50 15 $122.50 20 $135.00 30 $180.00 40 $290.00 What is the marginal cost of the 15th pair of jeans?

$4 per unit WRONG $1.33 per unit The change in cost from the 10th to the 15th units is $20 and the change in units is five, so the marginal cost would be the change in cost divided by the change in output or ($20/5 units) = $4 per unit See Table 5.2 in textbook

On average, if a person spends $50,000 per year, Blank______ is spent on transportation. Multiple choice question. $0.16 $900 $18,000 $8,500 The data (in cents) is as follows: Housing (shelter, furnishings, upkeep), 33. Transportation, 16. Food, 13. Clothing, 3. Health care, 8. Entertainment, 5. Other goods and services, 10. Insurance and pensions, 12.

$8,500

On average, if a person spends $50,000 per year, ______ is spent on transportation. Multiple choice question. $8,500 $18,000 $0.16 $900 The data (in cents) is as follows: Housing (shelter, furnishings, upkeep), 33. Transportation, 16. Food, 13. Clothing, 3. Health care, 8. Entertainment, 5. Other goods and services, 10. Insurance and pensions, 12.

$8,500

Economic profit = Multiple choice question. (total economic cost) - (total revenue) (total revenue) - (total economic cost) (total revenue) - (explicit cost) (explicit revenue) - (explicit costs)

(total revenue) - (total economic cost)

**Economic versus Accounting Costs**

* Accounting cost: the actual expenses plus depreciation on equipment and buildings. * Economic cost: includes accounting cost plus opportunity cost - the value of the next best alternative use of resources. * Economic cost is typically higher than accounting cost because it considers these unseen opportunity costs.

**Costs of Production**

* Refers to all costs incurred in producing goods or services. * Includes both fixed costs (like rent or machinery, which do not change with output) and variable costs (like raw materials, which do change with output). * Total cost of production is the sum of fixed and variable costs.

**Supply Horizons**

* Represents how quickly a producer can respond to changes in price or demand. * Short-run supply horizon: some inputs (like labor) can be changed, but others (like capital or technology) are fixed. * Long-run supply horizon: all inputs can be changed. Producers have more flexibility to respond to market changes.

Suppose Tom, George, and Lisa are the only consumers in the market shown in the figure. If the price per hour of tutoring is $50, market demand is equal to _____. Multiple choice question. 14 4 5 1 Top panel: The data for price per hour, quantity of tutoring demanded (hours per semester; for Tom, Antonio, Anika), total quantity demanded for A through I are as follows: A; 50; 1, 4, 0; 5. B; 45; 2, 6, 0; 8. C; 40; 3, 8, 0; 11. D; 35; 5, 11, 0; 16. E; 30; 7, 14, 1; 22. F; 25; 9, 18, 3; 30. G; 20; 12, 22, 5; 39 (highlighted). H; 15; 15, 26, 6; 47. I; 10; 20, 30, 7; 57. Bottom panel: A) Tom's demand curve: The horizontal axis ranges from 0 through 20. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (0, 50) to (20, 10) through 7 points including (12, 20). B) Antonio's demand curve: The horizontal axis ranges from 0 through 32. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (4, 50) to (30, 10) through 7 points including (22, 20). C) Anika's demand curve: The horizontal axis ranges from 0 through 16. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (0, 30) to (6, 10) through 3 points including (5, 20). D) The market demand curve: The horizontal axis ranges from 0 through 60. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (5, 50) at A to (57, 10) at I through 7 points including (40, 20) at G which is highlighted. Note: All data is approximate.

5

Suppose Tom, George, and Lisa are the only consumers in the market shown in the figure. If the price per hour of tutoring is $10, market demand is equal to Multiple choice question. 50. 67. 37. 57. old_mkt demand(6681705e).jpg Text Alternative Top panel: The data for price per hour, quantity of tutoring demanded (hours per semester; for Tom, Antonio, Anika), total quantity demanded for A through I are as follows: A; 50; 1, 4, 0; 5. B; 45; 2, 6, 0; 8. C; 40; 3, 8, 0; 11. D; 35; 5, 11, 0; 16. E; 30; 7, 14, 1; 22. F; 25; 9, 18, 3; 30. G; 20; 12, 22, 5; 39 (highlighted). H; 15; 15, 26, 6; 47. I; 10; 20, 30, 7; 57. Bottom panel: A) Tom's demand curve: The horizontal axis ranges from 0 through 20. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (0, 50) to (20, 10) through 7 points including (12, 20). B) Antonio's demand curve: The horizontal axis ranges from 0 through 32. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (4, 50) to (30, 10) through 7 points including (22, 20). C) Anika's demand curve: The horizontal axis ranges from 0 through 16. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (0, 30) to (6, 10) through 3 points including (5, 20). D) The market demand curve: The horizontal axis ranges from 0 through 60. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (5, 50) at A to (57, 10) at I through 7 points including (40, 20) at G which is highlighted. Note: All data is approximate.

57 ( I looked at price per hour $10 then total quantity demanded)

8.

8.

**demand curve**

A curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus. **How much we actually buy of any good will depend on its price** demand curve is graphical illustration of demand schedule amount we buy of a good depends on its price. **common feature of demand curves is their downward slope**

Which of the following would best exemplify the most inelastic demand? Multiple choice question. Smokers' demand for cigarettes. Drivers' demand for gasoline. A mining firm selling its output in a purely competitive market. A diabetic's demand for the life-saving drug insulin.

A diabetic's demand for the life-saving drug insulin.

Select all that apply Which of the following are the factors of production? Multiple select question. Capital Money Entrepreneurial ability Land Stocks, bonds, and other financial assets Labor

Capital Entrepreneurial ability Land Labor

Select all that apply Which of the following are the factors of production? Multiple select question. Capital Labor Land Stocks, bonds, and other financial assets Money Entrepreneurial ability

Capital Labor Land Entrepreneurial ability

Which of the following is not a key market participant in the U.S. economy? Multiple choice question. Business firms Consumers Government agencies Foreign participants Capital and investment

Capital and investment consumers business firms governments foreigners Capital and investment Reason: Capital and investment promote further markets but are not participants.

Which of the following is not a key market participant in the U.S. economy? Multiple choice question. Capital and investment Consumers Business firms Government agencies Foreign participants

Capital and investment Four separate groups of market participants: * Consumers * Business firms * Governments * foreigners

5. Given the table of elasticity estimates and price increases, calculate the percentage decrease in unit sales and then predict if total revenue should increase or decrease based on your calculation. Instructions: Enter your responses as a percentage rounded to one decimal place if necessary. Do not include a negative (-) sign with your answers. Degree of Elasticity Estimate Increase in Price % Relatively elastic (E>1) Airline travel, long run 2.4 10.0% Roughly unitary elastic (E=1) Shoes 0.9 10.0% Relatively inelastic (E<1) Coffee 0.3 10.0% Given the increase in price and your calculated percentage change in quantity demanded, what is the predicted impact on total revenue in each market? Airline Travel: total revenue will? decrease Shoes: Total revenue will? slightly increase Coffee: Total revenue will? increase

Decrease in Quantity Demanded (%, donot include negative sign) 24.0% 9.0% 3.0%

Select all that apply Which effects does a price ceiling have? There may be more than one correct answer. Multiple select question. Decrease the quantity supplied Increase quantity demanded Create a market surplus Decrease quantity demanded Create a market shortage Increase quantity supplied

Decrease the quantity supplied Increase quantity demanded Create a market shortage Price ceilings have 3 predictable effects: * Increase the **quantity** demanded * Decrease the **quantity** supplied * Create a market shortage

Select all that apply Every market transaction involves elements of: Multiple select question. Barter Demand Money Supply

Demand Supply

Which of the following would be considered a luxury and thus exhibit a high price elasticity of demand? Multiple choice question. Gasoline Dining out Sugar Newspapers

Dining out

How do variable costs move in relation with output? Multiple choice question. Unrelated Directly Proportionately Inversely

Directly

Elastic vs. Inelastic Demand

the demand for various goods is characterized in 3 ways: * elastic * inelastic * unitary elastic If E is larger than 1, demand is elastic: Consumer response is large relative to the change in price If E is less than 1, demand is inelastic. This is the case with popcorn, where E is only 0.5. **If demand is inelastic, consumers aren't very responsive to price changes** If E is equal to 1, demand is unitary elastic. In this case, the percentage change in quantity demanded is exactly equal to the percentage change in price.

barter

the direct exchange of one good for another, without the use of money

**barter**

the direct exchange of one good for another, without the use of money b/c money facilitates exchanges, **nearly every market transaction involves an exchange of dollars for goods (in product markets) or resources (in factor markets)**. Money plays a critical role in facilitating market exchanges and the specialization they permit.

laissez faire

the doctrine of "leave it alone" of nonintervention by government in the market mechanism

The law that says, when the additional consumption of a good yields smaller and smaller amounts of extra utility, is: Multiple choice question. the law of diminishing total utility the law of diminishing marginal utility the law of rational behavior the law of supply

the law of diminishing marginal utility

Economists say that as we consume successive units of a good, we get smaller and smaller amounts of marginal or extra utility. This claim is known as Multiple choice question. the law of diminishing total utility. the law of supply. the law of diminishing marginal utility. the law of rational behavior.

the law of diminishing marginal utility.

24. Which of the following is a constraint that motivates economic interactions?

the limited resources that individuals have An element common to all participants is limited resources

The time frame in which there are no fixed cost is known as: Multiple choice question. the short run the long run the fiscal year the quarterly production

the long run

3. A production function describes

the maximum amount of output attainable from a given combination of factor inputs A production function expresses the maximum quantity of a good atainable from different combinations of factor inputs

**opportunity cost**

the most desired goods and services that are forgone in order to obtain something else.

opportunity cost

the most desired goods and services that are forgone in order to obtain something else.

Consider the relationship between the price of gas and the quantity of gas consumed by drivers. If we are to consider the price of gas as the only factor affecting the quantity of gas consumed, while holding other factors such as drivers' incomes and tastes and preferences irrelevant, then we are applying Multiple choice question. the theory of marginal analysis. the other-things-equal assumption. the law of supply.

the other-things-equal assumption.

equilbrium price

the price at which the quantity of a good demanded in a given time period equals the quantity supplied. when market supply curve and market demand curve are together see only one price and quantity are compatible with the existing intentions of both buyers and sellers. this equilibrium price occurs at the intersection of the two curves

12. Ceteris paribus, a change in which of the following would be LEAST likely to cause a shift in the demand curve for jackets?

the price of jackets A change in the price to own - or the price of the good or service in question - is reflected by movement along the demand curve. The remaining options would all likely change the quantiity demanded at all prices and be reflected by a shift in the entire demand curve.

The selection of the short-run rate of output (with existing plan and equipment) is referred to as Multiple choice question. the economic decision the start-up decision the investment decision the production decision

the production decision

The choice of how intensively to use available plant and equipment in the short run is referred to as Multiple choice question. the production decision the economic decision the start-up decision the investment decision

the production decision **production decision** the selection of the short-run rate of output (with existing plant and equipment) The **short run** is characterized by the existence of fixed costs. i.e. factory built, office leased, machinery purchased. only decision how muchoutput to produce w/ existing facilities **production decision** the choice of how intensively to use available plant and equipment - typically made daily (jeans production) weekly (auto production) seasonally (farming)

law of demand

the quantity of a good demanded in a given time period increases as its price falls, ceteris paribus.

**law of demand**

the quantity of a good demanded in a given time period increases as its price falls, ceteris paribus. **this inverse relationship between price and quantity is so common that we refer to it as the law of demand**

law of supply

the quantity of a good supplied in a given time period increases at its price increases, ceteris paribus

Equilibrium price and equilibrium quantity occur where: Multiple choice question. the supply curve intersects the demand curve the demand curve intersects the marginal benefit curve price intersects the demand curve the supply curve intersects the price

the supply curve intersects the demand curve

Equilibrium price and equilibrium quantity occur where: Multiple choice question. the demand curve intersects the marginal benefit curve the supply curve intersects the demand curve price intersects the demand curve the supply curve intersects the price

the supply curve intersects the demand curve market demand curve - ability and willingness to buy 2 curves together only one price and quantity compatible w/ existing intentions of both buyers and sellers **equilbrium price** the price at which the quantity of a good demanded in a given time period equals the quantity supplied. **equilibrium price** occurs at the intersection of two curves

market demand

the total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands. market demand curve illustrates the ability and willingness of people to buy at those same prices (tutoring services)

market supply

the total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period, ceteris paribus. the market supply curve expresses the ability and willingness of producers to sell tutoring services at various prices

market mechanism

the use of market prices and sales to signal desired outputs (or resource allocations)

Economic costs are defined as Multiple choice question. implicit costs the lowest value paid to a resource used in the production of a good or service the value of all resources used to produce a good or service explicit plus economic costs

the value of all resources used to produce a good or service The value of all resources used to produce a good or service; opportunity cost.

22. What is the goal of a business?

to maximize profit The goal of a business is to maximize profit

_____________revenue is calculated by multiplying the product price by the quantity sold.

total **total revenue of a seller is the amount of money received from product sales. It is determined by the quantity of the product sold and the price at which it is sold.** **Total revenue = price X quantity sold**

The goal of business is to maximize: Multiple choice question. satisfaction economic growth total profits social welfare

total profits

What is the term that indicates the total amount the seller receives from the sale of a product in a particular time period? Multiple choice question. Average revenue Total revenue Marginal revenue

total revenue

Profit is defined as: Multiple choice question. total revenue minus total cost total cost minus total revenue total revenue plus total cost total cost multiplied by output

total revenue minus total cost

Economic profit is Multiple choice question. total revenue minus explicit cost total economic cost minus total revenue total revenue minus total economic cost accounting profits minus explicit costs

total revenue minus total economic cost

25. The amount of utility obtained from the entire consumption of a good is known as

total utility Total utility refers to the total amount of satisfaction derived from the consumption of a single good or service

If a 4% decrease in the price of chocolate causes a 4% increase in the quantity demanded of chocolate, the demand is Multiple choice question. elastic. inelastic. unitary elastic. dependent on the actual quantity to determine elasticity.

unitary elastic

The percentage change in quantity demanded is equal to the percentage change in price when demand is Multiple choice question. optimally elastic. inelastic. elastic. unitary elastic.

unitary elastic

If a 2% decrease in the price of a good causes a 2% increase in the quantity demanded, the demand is Multiple choice question. unitary elastic. dependent on the actual quantity to determine elasticity. elastic. inelastic.

unitary elastic **According to the law of demand, quantity demanded increases when price falls. The price elasticity of demand measures how price sensitive consumers are**

price ceiling

upper limit imposed on the price of a good or service

Improvements in productivity will shift the production function Multiple choice question. to the right upward downward down and to the right

upward

The supply curve is a(n) ______ sloping curve. Multiple choice question. downward negative upward horizontal

upward **The market supply curve slopes upward to the right, indicating that larger quantities will be offered at higher prices**

When graphing production costs, the total cost curve will be______ and the fixed cost curve will be______. Multiple choice question. horizontal; downward sloping horizontal; upward sloping downward sloping; horizontal upward sloping; horizontal

upward sloping; horizontal

_____ costs are those costs that change with the level of output. Multiple choice question. Fixed Variable Economic Implicit

variable

20. Which of the following is not a factor of production?

wages Wages are not considered a factor of production because they are not a resource used to produce a good or service. Instead, they are a payment TO a factor of production (labor) in exchange for labor provided.

The economic question of '______ to produce' is about decisions related to the mix (quantity and type) of goods and services to make available in a given economy. Multiple choice question. what why for whom how

what

The economic question of ______ to produce' is about decisions related to the mix (quantity and type) of goods and services to make available in a given economy.

what

Evian water and Dasani water are substitute goods. If the price of Evian water increases, the demand for Dasani water Multiple choice question. will decrease. will increase. will not change. will not change but the quantity demanded will increase.

will increase

10.

x

6.

x

7.

x

9.

x

Select all that apply A firm's total costs of producing a specific output depend on which of the following? Multiple select question. The quality of resources given up to produce another good or service. The market value of the needed resources required to produce a given output. The quantities of resources required to produce a given output. The range of resource possibilities.

The market value of the needed resources required to produce a given output. The quantities of resources required to produce a given output.

Which of the following is true when the demand is unitary elastic? Multiple choice question. The percentage change in quantity demanded is less than the percentage change in price. The percentage change in quantity demanded is equal to the percentage change in price. The percentage change in quantity demanded is greater than the percentage change in price.

The percentage change in quantity demanded is equal to the percentage change in price.

What factors are involved in a firm's total cost of producing a specific output? Multiple choice question. Only the quantity of resources needed to produce that output The price and quantity of the resources needed to produce that output Explicit costs only Only the price of the resources needed to produce that output

The price and quantity of the resources needed to produce that output

What is the definition of average total cost? Multiple choice question. Total cost divided by marginal cost (MC) Total cost divided by fixed cost (FC) Total cost divided by output (Q) Total cost divided by change in output (Q)

Total cost divided by output (Q) **Average total cost (ATC) = total cost/ total output** - total cost divided by the quantity produced in a given time period - simply total cost divided by the rate of output

28. Which of the following statements is NOT correct?

Total revenue will fall if consumer's response to a price cut is relatively smaller than the price cut. If a firm cuts the price of a good and the resulting change in quantity demanded is large, total revenue will increase because the increase in revenue generated by the increase in quantity demanded will be greater than the decrease in revenue generated by the decrease in price.

When the price elasticity of demand is relatively price inelastic, a price increase will have what effect on total revenue? Multiple choice question. Total revenue will fall Total revenue will rise No change in total revenue Total revenue will be equal to the change in price

Total revenue will rise Reason: When the price elasticity of demand is relatively inelastic, price and total revenue move in the same direction.

The average total cost curve is Multiple choice question. upward sloping throughout. U-shaped. L-shaped. downward sloping throughout.

U-shaped.

9. Problem 04-10 Use the demand schedule, graph, and the elasticity formula to answer one question. Economists estimate price elasticities more precisely by using average price and quantity to compute percentage changes. The formula below describes this method. **Price Elasticity of Demand, Midpoint Formula: E=percentage change in quantity demanded / (Q2-Q1/2) percentage change in price = (P2-P1)/((P1+P2)/2)** **Note that the denominator in each part uses the **Average quantity or the average price** Using the table, graph, and formula, compute E for a popcorn price increase from 15 cents to 25 cents per ounce. Instructions Round your response to one decimal place.

Use the demand schedule, graph, and the elasticity formula to answer one question. Price×Quantity Demanded=Total Revenue$ 0.501$ 0.500.4520.900.4041.600.3562.100.3082.400.25123.000.20163.200.15203.000.10252.500.05301.50 Economists estimate price elasticities more precisely by using average price and quantity to compute percentage changes. The formula below describes this method. Price Elasticity of Demand, Midpoint Formula: E = percentage change in quantity demanded ÷ percentage change in price, in absolute value where, percentage change in quantity demanded = (Q2 − Q1) ÷ [(Q1 + Q2) ÷ 2] percentage change in price = (P2 − P1) ÷ [(P1 + P2) ÷ 2] Note that the denominator in each part uses the average quantity or the average price. Using the table, graph, and formula, compute E for a popcorn price increase from $0.40 to $0.50 per ounce. Step 1/2 P1 = $0.40 P2 = $0.50 Q1 = 1.60 units Q2 = 1 unit Average of price=(P1 + P2) / 2=$0.40+$0.502=$0.45 Percentage change in price=(P2 − P1) / Average of price=0.50−0.400.45=0.22 Percentage change in price = 0.22 Average of quantity=(Q1 + Q2) / 2=1.60+12=1.30 Percentage change in quantity demanded=(Q2 − Q1) / Average of quantity=1−1.601.30=−0.46 Percentage change in quantity demanded = - 0.46 Explanationfor step 1 Old price = P1 and Old quantity = Q1 New price = P2 and New quantity = Q2 Step 2/2 Price elasticity of demand =percentage change in quantity demanded / percentage change in price=−0.460.22=−2.09 E = 2.09 (absolute value) The demand is highly elastic since its absolute value is greater than 1. Explanationfor step 2 Absolute value means that we have to remove the negative sign from the result. Final answer When popcorn price increase from $0.40 to $0.50 per ounce. E = 2.09 (absolute value) Price elasticity of demand = 2.09 Demand is highly elastic.

________________is the satisfaction or pleasure one gets from consuming a good or service.

Utility

Select all that apply Which of the following would incur an explicit cost? Multiple select question. Utility usage A business owner's use of her own money. Labor services Raw materials

Utility usage Labor services Raw materials

Select all that apply Which of the following would incur an explicit cost? Multiple select question. A business owner's use of her own money. Utility usage Labor services Raw materials

Utility usage Labor services Raw materials A business owner's use of her own money. Reason: This is an example of an implicit cost or the firm's opportunity cost of using self-owned, self-employed resources. Utility usage Labor services Raw materials

**demand schedule**

a table showing the quantities of a good a consumer is willling and able to buy at alternative prices in a given time period, ceteris paribus. As price falls, the quantity demanded increases, the quantity demanded increases.

The equilibrium price reflects a compromise between __________and ______________ .

buyers or demand sellers or supply **The equilbrium price and quantity reflect a compromise between buyers and sellers. No other compromise yields a quantity demanded that is exactly equal to the quantity supplied.**

Demand is based on: Multiple choice question. market availability the interaction of buyers and sellers buyers' intentions buyers' actual purchases

buyers' intentions

_____ is the concept that resource constraints place a ceiling on potential output. Multiple choice question. Capacity Efficiency Productivity Cost of production

capacity

______ is the concept that resource constraints place a ceiling on potential output. Multiple choice question. Productivity Efficiency Cost of production Capacity

capacity

29. Flour would be considered which of the following factors of production?

capital Flour would be included in capital. Labor captures workers, entrepreneurship captures ideas, and land captures the space and natural resources used in production. Capital includes raw materials, and flour would fir into this category because it is not a naturally occurring resource.

A price ____________ is the upper limit (or maximum legal price) a seller may charge for a product or service.

ceiling **price ceiling** an upper limit imposed on the price of a good or service - upper limit imposed on the price of a good or service

The assumption that nothing else changes is known as Multiple choice question. the market mechanism ceteris paribus scarcity opportunity cost

ceteris paribus

The equilibrium price will ______ whenever the supply or demand curve shifts. Multiple choice question. increase change remain unchanged decrease

change ***In reality, tastes, incomes, the price and availability of other goods, or expectations could change at any time. When this happens, ceteris paribus will be violated, and the demand curve will have to be redrawn. Such a shift of the demand curve will lead to a new equilbrium price and quantity. Indeed, the equilbrium price will change whenever the supply or demand curve shifts.**

The equilibrium price will _____ whenever the supply or demand curve shifts. Multiple choice question. increase remain unchanged change decrease

change Reason: Equilibrium price could increase, but it could also decrease depending on the shift of the demand or supply curve. **the equilbrium price will change whenever the supply or demand curve shifts**

Marginal physical product is calculated as change in total output divided by: Multiple choice question. change in product price change in input quantity change in input price change in the labor wage rate

change in input quantity

Variable costs are those expenses that Multiple choice question. increase when output declines and decrease when output increases. consider the average cost over a period of time. change with the level of output. don't change with the level of output.

change with the level of output.

Variable costs are those expenses that Multiple choice question. change with the level of output. consider the average cost over a period of time. don't change with the level of output. increase when output declines and decrease when output increases.

change with the level of output. - costs of production that change when the rate of output is altered (e.g. labor and material costs)

Smartphones and apps are what type of goods? Multiple choice question. Substitute Inferior Complementary Independent

complementary

Goods that "go together" are called ___________(complementary/substitute) goods.

complementary or complement

When modeling market interactions, Multiple choice question. consumers supply factors of production consumers supply goods and services producers demand goods and services producers supply factors of production

consumers supply factors of production

Market participants include: Multiple choice question. only the government and consumers only the government and foreign market participants factor markets, product markets, and foreign market participants consumers, businesses, the government, and foreign market participants

consumers, businesses, the government, and foreign market participants

A consumer's choices are directly influenced by all of the following except: Multiple choice question. prices of goods income (or budget) costs of production consumers' preferences marginal utility

costs of production

A consumer's choices are directly influenced by all of the following except: Multiple choice question. income (or budget) costs of production marginal utility prices of goods consumers' preferences

costs of production Reason: Costs of production **indirectly** influence consumer choice

Other things equal, if consumers believe that the price of gas will fall tomorrow, the demand for gas today will likely ______. Multiple choice question. increase decrease be higher than next week not change

decrease

If a 4% decline in the price of cut flowers results in an 8% increase in the quantity demanded, the price elasticity of demand for cut flowers is Multiple choice question. elastic. inelastic. unitary elastic. dependent on the quantity.

elastic

If demand is relatively price ____________(elastic/inelastic), a decrease in price will increase total revenue.

elastic

The more a good or service is considered to be a "luxury" rather than a "necessity," the more ______ the price elasticity of demand. Multiple choice question. unitary elastic elastic inelastic relative

elastic

What type of demand is represented by a small change in price that leads to a large change in the quantity demanded? Multiple choice question. Unitary elastic Elastic Inelastic

elastic Consumer response is large relative to the change in price.

Airline travel and new cars are two products that exhibit relatively price ___________ (elastic/inelastic) demand.

elastic look at chart for Degree of Elasticity and Estimate

A relatively large percentage change in quantity demanded divided by a relatively smaller change in price yields relatively price (elastic/inelastic) demand.

elastic (missed)

The price _________ of demand measures the responsiveness of consumers' quantity demanded to a price change.

elasticity **the response of consumers to a change in price is measured by the price elasticity of demand** refers to the percentage change in quantity demanded divided by the percentage change in price Price elasticity (e) = percentage change in quantity demanded/percentage change in price

Which of the following would be considered a necessity and thus have a low price elasticity of demand? Multiple choice question. Jewelry Vacation travel Electricity Designer shoes

electricity

When demand is unitary elastic, the percentage change in quantity demanded is _____ the percentage change in price. Multiple choice question. less than equal to greater than

equal to

The equilibrium price and quantity reflect a compromise between buyers and sellers where quantity demanded ______ the quantity supplied. Multiple choice question. exactly equals cannot be compared to is less than is greater than

exactly equals **the equilibrium price and quantity reflect a compromise between buyers and sellers. No other compromise yields a quantity demanded that is exactly equal to the quantity supplied**

A shortage occurs when quantity demanded ___________ quantity supplied. (Enter only one word in the blank.)

exceeds, surpasses, exceed, or outweighs

Select all that apply The determinants of demand include: Multiple select question. tastes number of sellers cost of production expectations income

expectations income the availability and prices of other goods tastes

________________costs are the monetary payments a firm makes to those who provide the resources or inputs to production.

explicit

A firm's monetary payments to those who supply transportation services is an example of ______. Multiple choice question. regular costs implicit costs economic costs explicit costs

explicit costs

A firm's monetary payments to those who supply transportation services is an example of _____. Multiple choice question. explicit costs economic costs regular costs implicit costs

explicit costs explicit costs economic costs Reason: While explicit costs are a type of economic cost, they are only part of these costs. Implicit costs are also considered economic costs. regular costs implicit costs Reason: Implicit costs are a firm's opportunity costs of using its self-owned, self-employed resources.

Economic costs = Multiple choice question. explicit costs - implicit costs explicit costs + implicit costs explicit costs implicit costs

explicit costs + implicit costs

When marginal utility is negative, then total utility is: Multiple choice question. rising, but at a declining rate falling neither rising nor falling also negative

falling **Marginal utility is positive therefore total utility rises** **So long as marginal utility is positive, total utility must be increasing**

If successive units of a good yield smaller and smaller amounts of marginal utility, then the consumer will buy additional units of a product only if its price ______. Multiple choice question. rises is inelastic falls is elastic

falls

A firm cannot avoid paying _________ costs in the short run.

fixed

Factory rental payments, sewing machine lease payments, and interest on a firm's debts are all examples of ___________costs.

fixed

In the long run there are no ______ costs. Multiple choice question. fixed variable opportunity marginal

fixed

5. Total cost is equal tp ___________ cost at an output level of zero.

fixed Since fixed costs are constant at all levels of output then at an output of zero they would equal total costs. This represents the idea that even if the firm chooses to produce nothing, it will still have to pay these fixed costs.

What costs can a firm not avoid paying in the short run? Multiple choice question. Variable costs Economic costs Fixed costs Marginal costs

fixed costs

A price floor _________ , is a lower limit imposed on the price of a good or service.

floor

A price ________is a lower limit imposed on the price of a good or service.

floor **price floor** lower limit imposed on the price of a good or service

A price ____________ is a legally mandated price imposed above the equilibrium price, which would be established between buyers and sellers in a free market.

floor **price floor** lower limit imposed on the price of a good or service minimum price imposed by the government for a good or service. The objective is to raise the price of the good and create more income for the seller. - common in the farm sector

The economic question of '______ to produce' is about decisions related to who is going to consume the goods and services produced. Multiple choice question. for whom what how why

for whom

Which of these goods has relatively elastic demand? Degree of ElasticityEstimateRelatively elastic (E > 1) Airline travel, long run2.4Fresh fish2.2New cars, short run1.2-1.5Unitary elastic (E = 1) Private education1.1Radios and televisions1.2Shoes0.9Relatively inelastic (E < 1) Cigarettes0.4Coffee0.3Gasoline, short run0.2Long-distance telephone calls0.1 Multiple choice question. Coffee Gasoline Fresh fish Prescription drugs

fresh fish

The purpose of a production _________is to tell us just how much output we can produce with varying amounts of factor inputs.

function

government failure

government intervention that fails to improve the economic outcomes

When demand is elastic, the absolute value of price elasticity of demand will be Multiple choice question. equal to one. greater than one. less than one.

greater than one **Because price and quantity demanded always move in opposite directions (the law of demand), E is a negative value**

The larger the number of substitute goods available, the (higher/lower) the price elasticity of demand.

greater, higher, larger, more, bigger, or increased

The goal of consumers is to maximize: Multiple choice question. happiness economic growth profit social welfare

happiness

14. The goals of the principal participants in the economy are to maximize

happiness for consumers, profits for businesses, and general welfare for government. Consumers strive to maximize their own happiness, businesses try to maximize profits, government agencies attempt to maximize social welfare

How might a natural disaster such as Hurricane Harvey impact an unregulated market for bottled water? The damage inflicted would most likely cause Multiple choice question. lower prices and less water bought and sold higher prices and less water bought and sold lower prices and more water bought and sold higher prices and more water bought and sold

higher prices and more water bought and sold

Along a typical demand curve, as price rises total revenue Multiple choice question. initially increases then decreases initially decreases then increases remains constant continuously increases

initially increases then decreases

Demand is an expression of consumer buying_____________

intentions, desires, plans, intention, or desire

The decision to build, buy, or lease plant and equipment or the decision to enter or exit an industry is known as the _____________decision.

investment

The decision to build, buy, or lease plant and equipment or the decision to enter or exit an industry is known as the Multiple choice question. opportunity cost production decision investment decision productivity decision

investment decision **investment decision** the decision to build, buy, or lease plant and equipment; the decision to enter or exit an industry - in a long-run (no fixed costs) situation, a firm can make the investment decision

10. A market

is any place (physical or digital) where goods are bought and sold A market exists anywhere goods are bought and sold

Marginal utility: Multiple choice question. always rises as successive units of a good are consumed explains why product supply curves slope upwards is the extra satisfaction from the consumption of one more unit of some good or service is the extra output a firm obtains when it adds another unit of labor

is the extra satisfaction from the consumption of one more unit of some good or service

7. People benefit by participating in the market because

it facilitates specialization, increased production, and increased consumption Specialization is necessary due to inability to produce all things and the limited amount of time to produce all desired goods

The inverse relationship between price and quantity demanded is called the Multiple choice question. income effect substitution effect law of demand law of supply

law of demand

A price ceiling is the upper limit (or maximum legal price) a seller may charge for a product or service where a price at or below the ceiling is ______ and a price above the price ceiling is _____. Multiple choice question. legal; illegal illegal; legal legal; legal illegal; illegal

legal; illegal

price floor

lower limit imposed on the price of a good or service

The law of diminishing _____________utility states that added satisfaction declines as additional units of a given product are consumed.

marginal

_________________utility is the extra satisfaction or utility a consumer realizes from consuming an additional unit of a particular product.

marginal

_________________cost equals a change in total cost divided by a change in total output.

marginal **Marginal cost (MC) refers to the change in total costs when one more unit of output is produced.** **Marginal cost = change in total cost / change in total output**

The upturn of the average total cost curve is caused by rising _____________ (marginal/fixed) costs.

marginal **the upturn of the ATC curve is caused by rising marginal costs** Marginal cost (MC) refers to the change in total costs when one or more unit of output is produced. **an important feature of the ATC curve is its shape. Average costs start high, then rise once again, giving the ATC curve a distinctive U shape - the initial decline in ATC is largely due to fixed costs. At low rates of output, fixed costs are a high proportion of total costs. - very expensive to lease (or buy) an entire factory to produce only few pair of jeans. **

The change in total cost divided by the change in output is: Multiple choice question. marginal revenue marginal physical product marginal output marginal cost

marginal cost Marginal cost (MC) refers to the change in total costs when one or more unit of output is produced In practice, marginal cost is easy to measure, just observe how much total costs increase when one more unit of output is produced. For larger increases in output, marginal cost can also be approximated by the formula: **Marginal cost = change in total cost/ change in total output**

Select all that apply Which are the two most important costs a firm needs to know to make profitable production decisions? Multiple select question. marginal cost total cost average total cost fixed cost

marginal cost average total cost

21. Improvements in technology shift the

marginal cost curve downward Improvements in technology will cause the marginal physical product of that factor to increase and therefore cause marginal cost to decrease at all quantities.

______ is the change in utility that results from the consumption of one more unit of a product. Multiple choice question. Marginal utility Increasing marginal utility Total utility Usefulness

marginal utility

15. Maximum total utility is achieved where

marginal utility equals zero Any additional units added after the additional utility falls to zero will be negative and therefore reduce total utility

Consumer choice is influenced not only by the ______ utility that extra units of a good will yield, but also by how much ______ must be given up to obtain extra units of the good. Multiple choice question. total; income increasing; income total; utility marginal; income marginal; utility

marginal; income **Consumer choice is influenced by marginal utility and then by income.** total; utility Reason: Total utility and utility are redundant. increasing; income marginal; utility Reason: Consumer choice is influenced by marginal utility and by income. marginal; income total; income Reason: Marginal utility, because the question states that 'extra units of a good will yield,' and marginal refers to additional or extra changes.

Consumer choice is influenced not only by the ______ utility that extra units of a good will yield, but also by how much ______ must be given up to obtain extra units of the good. Multiple choice question. total; utility marginal; utility marginal; income total; income increasing; income

marginal; utility Reason: Consumer choice is influenced by marginal utility and by income.

Which of the following represents any place where goods and services are bought and sold? Multiple choice question. Market Contract Bank Government

market

The _______________supply of a good reflects the collective behavior of all firms that are willing and able to sell that good at various prices.

market - the total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period, ceteris paribus.

______ is the total quantities of a good or service that people are willing and able to buy at alternative prices in a given time period. Multiple choice question. Market demand Individual demand Individual supply Market supply

market demand

The total quantities of a good or service that people are willing and able to buy at alternative prices in a given time period is Multiple choice question. market supply market demand individual demand individual supply

market demand **market demand** - the total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands

______ is the amount by which the quantity supplied exceeds the quantity demanded at a given price. Multiple choice question. Supply and demand Market shortage Market equilibrium Market surplus

market surplus **market surplus** - the amount by which the quantity supplied exceeds the quantity demanded at a given price; excess supply. more supplied than cared to purchase (demanded) at available price

Nearly every market transaction involves an exchange of ______ for goods (in product markets) or resources (in factor markets). Multiple choice question. services money goods labor

money

The idea that the economy does not have enough resources to produce all the goods and services wanted is the idea of: Multiple choice question. supply opportunity cost demand scarcity

scarcity

8. Consumers act as _____________ factors of production in the _________ market.

sellers; factor We assume that households (consumers) own the factors of production and provide these to firms in factor markets.

We illustrate an income change with a _____________of the demand curve rather than a movement along the demand curve.

shift **We illustrate income changes with shifts of the demand curve rather than movements along it (due to changes in price).**

A change in supply is represented by a ______ the supply curve while a change in quantity supplied is represented by a ______ the supply curve. Multiple choice question. movement along; movement along shift of; shift of shift of; movement along movement along; shift of

shift of; movement along Shifts in Supply **Changes in quantity supplied** movements along a given supply curve **Changes in supply** shifts of the supply curve

The goal of government is to maximize: Multiple choice question. satisfaction total profits economic growth social welfare

social welfare

Because there is variation in the amount of utility that the consumption of goods or services provides, economists therefore recognize that utility is Multiple choice question. easy to quantify objective subjective a fixed value

subjective

The utility of a specific product or service may vary widely from person to person. Therefore, it is: Multiple choice question. a fixed value subjective easy to quantify objective

subjective

The utility of a specific product or service may vary widely from person to person. Therefore, it is: Multiple choice question. a fixed value subjective objective easy to quantify

subjective

Goods that can be used instead of other goods are called ____________________(complementary/substitute) goods.

substitute

Nearly every market transaction involves an exchange of ________for goods (in product markets) or resources (in factor markets).

Blank 1: money, dollars, cash, or currency

Other key terms you will see in this chapter. **The Production Function** Costs of Production Refers to all costs incurred in producing goods or services. Includes both fixed costs (like rent or machinery, which do not change with output) and variable costs (like raw materials, which do change with output). Total cost of production is the sum of fixed and variable costs. Supply Horizons Represents how quickly a producer can respond to changes in price or demand. Short-run supply horizon: some inputs (like labor) can be changed, but others (like capital or technology) are fixed. Long-run supply horizon: all inputs can be changed. Producers have more flexibility to respond to market changes. Economic versus Accounting Costs Accounting cost: the actual expenses plus depreciation on equipment and buildings. Economic cost: includes accounting cost plus opportunity cost - the value of the next best alternative use of resources. Economic cost is typically higher than accounting cost because it considers these unseen opportunity costs.

* Represents the relationship between inputs used in production (like labor and capital) and the output of goods or services. Think of the Ratatouille example above. * Shows how changes in inputs affect output. This is often visualized as a graph or equation.

Gasoline and milk are two goods that exhibit relatively price ___________(elastic/inelastic) demand.

**Demand for necessities is relatively inelastic** **Demand for luxury goods is relatively elastic**

3. According to the elasticity computation, suppose the price elasticity of demand for popcorn equals 0.5 (in absolute value). By how much would popcorn sales fall if the price increased by Instructions: Enter your responses as a whole number a. 10 percent? 5% b. 30 percent? 15% Case 1 - percentage change ni quantity demanded = 0.5 * 10 = 20% Case 2 - percentage.change.in.quantity.demanded = 0.5 * 30 = 15%

**E= percentage change in quantity demanded/ percentage change in price = 0.5 (in absolute value)** As we know elasticity(E) = change in quantity / change in price and we are given E=0.5 a. if price increased by 20% 0.5= change in quantity / 20 Hence change in quantity is 10% b. similarly change in quantity= 0.5 * change in price = 0.5 * 50= 25% Explanationfor step 1 According to law of demand when price rises the demand decreases According to the elasticity computation of 0.5, how much would popcorn sales fall if the prices increased by:40%-30%- Expert's answer E=percentag.change.in.pricepercentage.change.in.quantity.demanded​ Case 1 0.5=400.5=40percentage.change.in.quantity.demanded​ =0.5∗40=20percentage.change.in.quantity.demanded=0.5∗40=20percent Case 2 0.5=300.5=30percentage.change.in.quantity.demanded​ =0.5∗30=15 percentage.change.in.quantity.demanded=0.5∗30=15percent

Select all that apply Which of the following are determinants of supply? Multiple select question. Prices of other goods Producer expectations Taxes and subsidies Number of buyers

**Prices of other goods** **Producer expectations** Reason: The price of complementary goods, which are sold together with other goods, affect consumer demand for said other goods, not suppliers **Taxes and subsidies** Growth in the number of producers or sellers (competitors) would be correct. The determinants of market supply include: * Technology * Factor costs * Other goods * Taxes and subsidies * Expectations * Number of sellers

The response of consumers to a change in price is measured by the price __________ of demand.

**The response of consumers to a change in price is measured by the price elasticity of demand**

The price ____________of demand measures the responsiveness of consumers' quantity demanded to a price change.

**The response of consumers to a change in price is measured by the price elasticity of demand** **The price elasticity of demand refers to the PERCENTAGE change in quantity demanded divided by the PERCENTAGE change in price**

2. Using the demand schedule below, plot the demand curve on the graph and answer four questions about demand and elasticity. a. Illustrate the demand curve on the following graph: Shoes: Price (per pair) Quantity of Shoes (pairs per year) Instructions: Enter your responses as a whole number b. Calculate the total revenue from shoe sales at each of the following prices: i. $120? $720 ii. $100 $1000 iii. $80? $1200 iv. $60? $1200 v. $40? $1040 Referencing the total revenue calculated in part b, determine if demand is elastic, unitary elastic, or inelastic as the price changes: c. from $120 to $100 a pair? Demand is? elastic d. from $80 to $60 a pair? Demand is? unitary elastic e. from $60 to $30 a pair? Demand is? inelastic

**Total Revenue = price X quantity sold** Total revenue is the price of a product multiplied by the quantity sold in a given time period (p * q)** Price elasticity (E) = percentage change in quantity demanded/ percentage change in price Example: increase price of popcorn by 20 percent law of demand quantity of popcorn demanded will fall - how far sales drop - suppose unit sales (quantity demanded) fall by 10 percent - compute: E- percentage change in quantity demanded/ percentage in price = -10%/+20% = -0.5 Elastic versus Inelastic Demand If E is larger than 1, we say demand is elastic - Consumer response is large relative to the change in price If E is less than 1, we say demand is inelastic. This is the case with popcorn, where E is only 0.5 **If demand is inelastic, consumers aren't very responsive to price changes** If E is equal to 1, demand is unitary elastic. In this case, the percentage change in quantity demanded is exactly equal to the percentage change in price.

Which of the following defines ceteris paribus? Multiple choice question. The idea that factors other than those being considered in a particular analysis do not change (nothing else changes). In a particular analysis, "additional" factors, other than those under consideration, are given equal consideration when factored into an analysis. The idea that, in a particular analysis, "additional" factors, other than those under consideration, play a significant role in said analysis.

**ceteris paribus - the assumption that nothing else changes. The idea that factors other than those being considered in a particular analysis do not change (nothing else changes).** The **ceteris paribus** assumption is not as far-fetched as it may seem. People's tastes (desires) don't change very quickly. Income tends to be fairly stable from week to week. Even expectations for the future are slow to change. Accordingly, the price of a good may be the only thing that changes on any given day. In that case, a change in price may be the only thing that prompts a change in consumer behavior.

8. Refer to the News Wire to answer one question. News Wire: Price Elasticity According to the News Wire, what was the predicted price elasticity of demand for the iPhone 11? Instructions: Round your response to two decimal places

1.21

HOMEWORK CH 4 1. Answer two questions about marginal utility Instructions: Enter your responses as a whole number a. Which box of popcorn first shows diminished marginal utility? Box number? 2 b. In the cartoon "You can't have too much of a good thing, " which pizza slice first yields negative marginal utility? "I ate my first slice of this pizza, and it was fantastic. The next two slices were pretty good. My fourth slice was alright, and the fifth was okay. But I don't think I want another bite" Slice number? 6

**law of diminishing marginal utility** - The marginal utility of a good declines as more of it is consumed in a given time period.

Consumer choice is influenced not only by the______ utility that extra units of a good will yield, but also by how much ______ must be given up to obtain extra units of the good. Multiple choice question. marginal; utility Reason: Consumer choice is influenced by marginal utility and by income. total; income Reason: Marginal utility, because the question states that 'extra units of a good will yield,' and marginal refers to additional or extra changes. total; utility Reason: Total utility and utility are redundant. increasing; income marginal; income

**marginal, income Reason: Marginal utility, because the question states that 'extra units of a good will yield,' and marginal refers to additional or extra changes.**

**An increase in the price of Coke will change the ______ for Coke while a decrease in the price of Pepsi will change the ______ for Coke. Multiple choice question. demand; quantity demanded quantity demanded; demand quantity demanded; quantity demanded demand; demand

**quantity demanded; demand** Reason: Recall the difference between a change in quantity demanded (Qd) and a change in demand (D).

Due to scarce resources, every individual, whether rich or poor, is faced with a(n) ____________cost when choosing to produce or consume more of one good over another.

Blank 1: opportunity

Suppose Tom, George, and Lisa are the only consumers in this market. If the price per hour of tutoring is $30, market demand is equal to Multiple choice question. 22. 52. 14. 21. old_mkt demand(6681705e).jpg Text Alternative Top panel: The data for price per hour, quantity of tutoring demanded (hours per semester; for Tom, Antonio, Anika), total quantity demanded for A through I are as follows: A; 50; 1, 4, 0; 5. B; 45; 2, 6, 0; 8. C; 40; 3, 8, 0; 11. D; 35; 5, 11, 0; 16. E; 30; 7, 14, 1; 22. F; 25; 9, 18, 3; 30. G; 20; 12, 22, 5; 39 (highlighted). H; 15; 15, 26, 6; 47. I; 10; 20, 30, 7; 57. Bottom panel: A) Tom's demand curve: The horizontal axis ranges from 0 through 20. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (0, 50) to (20, 10) through 7 points including (12, 20). B) Antonio's demand curve: The horizontal axis ranges from 0 through 32. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (4, 50) to (30, 10) through 7 points including (22, 20). C) Anika's demand curve: The horizontal axis ranges from 0 through 16. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (0, 30) to (6, 10) through 3 points including (5, 20). D) The market demand curve: The horizontal axis ranges from 0 through 60. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (5, 50) at A to (57, 10) at I through 7 points including (40, 20) at G which is highlighted. Note: All data is approximate.

22 I looked at the three consumers and price per hour of tutoring of $30 then traced to total quantity demanded which is $22

The demand curve can shift ______or __________when a factor other than price affects consumption of a good or service.

Blank 1: rightward, right, outward, or out Blank 2: leftward, left, inward, or in

Elements of ___________and ____________are involved in every market transaction.

Blank 1: supply Blank 2: demand

Select all that apply Which of the following explains the concept of explicit costs? Multiple select question. A firm's monetary payments that self-employed resources could have earned in their best alternative. A firm's monetary payments made for the use of resources owned by others.** A firm's monetary payments received for the use of resources owned by the firm. A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services.**

A firm's monetary payments made for the use of resources owned by others. A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services.

Which of the following refers to a change in quantity supplied? Multiple choice question. A change in the supply schedule A shift in the market supply curve A change in one or more of the determinants that will shift the supply curve A movement from one point to another on a fixed curve

A movement from one point to another on a fixed curve Changes in quantity supplied: movements along a given supply curve Changes in supply: shifts of the supply curve

Advertising has what primary impact on a market for a specific product? Multiple choice question. Advertising changes consumer income. Advertising changes the production decision. Advertising shifts the demand curve. Advertising shifts the supply curve.

Advertising shifts the demand curve. **A successful advertising campaign is one that shifts the demand curve for a product to the right, inducing consumers to increase their purchases of a product at every price**

All of the following goods or services would most likely exhibit relatively price inelastic demand, except: Degree of ElasticityEstimateRelatively elastic (E > 1) Airline travel, long run2.4Fresh fish2.2New cars, short run1.2-1.5Unitary elastic (E = 1) Private education1.1Radios and televisions1.2Shoes0.9Relatively inelastic (E < 1) Cigarettes0.4Coffee0.3Gasoline, short run0.2Long-distance telephone calls0.1 Multiple choice question. Coffee Gasoline Long-distance telephone calls Airline travel (in the long run)

Airline travel (in the long run)

Which of the following best clarifies the "ceteris paribus" assumption? Multiple choice question. All variables except those under immediate consideration are held constant for a particular analysis. Those variables under immediate consideration for a particular analysis are given equal weight. All variables are held constant or do not change for a particular analysis. Those variables under immediate consideration for a particular analysis are all held constant.

All variables except those under immediate consideration are held constant for a particular analysis.

Which one of the following best clarifies the ceteris paribus assumption? Multiple choice question. All variables except those under immediate consideration are held constant for a particular analysis. All variables in a particular analysis are given equal weight or consideration when used in a particular analysis. Those variables under immediate consideration for a particular analysis are all held constant. All variables are held constant or do not change for a particular analysis. Those variables under immediate consideration for a particular analysis are given equal weight.

All variables except those under immediate consideration are held constant for a particular analysis.

Which one of the following best clarifies the ceteris paribus assumption? Multiple choice question. Those variables under immediate consideration for a particular analysis are given equal weight. All variables except those under immediate consideration are held constant for a particular analysis. Those variables under immediate consideration for a particular analysis are all held constant. All variables in a particular analysis are given equal weight or consideration when used in a particular analysis. All variables are held constant or do not change for a particular analysis.

All variables except those under immediate consideration are held constant for a particular analysis. In deciding whether to buy something, our immediate focus is typically on a single variable - namely price. Assume that a person's tastes, income, and expectations are set in stone and that the prices of other goods are fixed as well. This is the **ceteris paribus** assumption we first encountered in Ch. 1

Which of the following illustrates a simple change in quantity demanded? Multiple choice question. As a result of a recession in the United States, people spend less money on apples. The price of apples rises and rises and people continue to buy more and more apples. The price of bananas rises, so people buy more apples. As a result of increasing prices, Mr. Fuji decides to buy fewer apples.

As a result of increasing prices, Mr. Fuji decides to buy fewer apples.

Which of the following illustrates a simple change in quantity demanded? Multiple choice question. The price of bananas rises, so people buy more apples. The price of apples rises and rises and people continue to buy more and more apples. As a result of increasing prices, Mr. Fuji decides to buy fewer apples. As a result of a recession in the United States, people spend less money on apples.

As a result of increasing prices, Mr. Fuji decides to buy fewer apples.

In the supply and demand model, quantity demanded is illustrated on the ______ axis and price is illustrated on the __________axis. The horizontal axis ranges from 0 through 20 in increments of 1. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (1, 50) at A to (20, 10) at I through A, B, C, D, E, F, G, and H. The point at D is highlighted and falls at (5, 35). The label on the right reads: "As price falls, the quantity demanded increases." Note: All data is approximate

Blank 1: horizontal or x Blank 2: vertical or y

A(n) ___________ is an institution, place, or mechanism that brings buyers and sellers into contact to buy and sell goods and services.

Blank 1: market or marketplace

Which statement below is true of the variable cost and the total cost of production? Multiple choice question. Both variable and total costs decrease at first by increasing amounts and then by decreasing amounts as output increases.** Both variable and total costs increase at first by increasing amounts and then by decreasing amounts as output increases. Both variable and total costs decrease at first by decreasing amounts and then by increasing amounts as output increases. Both variable and total costs increase at first by decreasing amounts and then by increasing amounts as output increases.

Both variable and total costs increase at first by decreasing amounts and then by increasing amounts as output increases. Both variable and total costs increase at first by decreasing amounts and then by increasing amounts as output increases.

8. Problem 04-09 Refer to the News Wire to answer one question News Wire: Price Elasticity Apple Slashes the Price of iPhone 11 According to the News Wire, what was the predicted price elasticity of demand for the iPhone 11? 1.21 Instructions: Round your response to two decimal places.

Elasticity = percentage change in quantity demanded/ percentage change in price. Here,price cut (change in price) is = 14 percent And change in quantity demanded (expected sales ) is 17 percent. Hence elasticity is E = -(17/14) =1.21. The predicted elasticity of demand would be 1.21

Select all that apply Resource inputs used to produce goods and services include: Multiple select question Entrepreneurial ability Capital Stocks, bonds, and other financial assets Labor Land

Entrepreneurial ability Capital Labor Land

________________ price is the price at which the quantity of a good demanded in a given time period equals the quantity supplied.

Equilibrium The equilibrium price and quantity reflect a compromise between buyers and sellers. No other compromise yields a quantity demanded that is exactly equal to the quantity supplied.

10. Law of Demand Campus Drinking and Alcohol Prices a. According to the Harvard study, what would be the response of students to a tax on aocohol that raises the price of alcoholic drinks by $1? Students will drink less b. On the following graph, which point best represents the response of students to hgiher alcohol prices? Point A ( Demand upperward left) Market for Alcoholic Drinks

Explanation a. According to the study, students faced with a $1 increase above the average drink price will be 33 percent less likely to drink at all or as much. b. Point A. In the graph, the price that students will pay would be higher and the quantity of alcohol consumed would be lower.

9. Given the following data describing the gasoline market, answer three questions about equilbrium. Instructions: In parts a and b, round your responses to two decimal places. in part c, enter your response as a whole number. a. What is the equilbrium price? $3.00 per gallon b. If quantity supplied at every price is reduced by 6 gallons, what is the new equilbrium price? $3.50 per gallon c. If the government freezes the price of gasoline at its initial equilbrium price found in part a, how much of a surplus or shortage will exist when supply is reduced as described in part b? There will be a shortage of 6 gallons

Explanation a. Equilibrium price is the price at which quantity demanded is equal to quantity supplied. In this case, the equilibrium price is $3.00, where quantity demanded (=32 gallons) is equal to quantity supplied (=32 gallons). b. To answer this question, it can help to create another data table. The following data table shows the original supply curve, the new supply curve (with quantity supplied decreasing by 6 gallons at every price), and the demand curve. The new equilibrium price is $3.50, which is the new price where quantity demanded (=30 gallons) is equal to the new quantity supplied (=30 gallons). Quantity Supplied Quantity Supplied Quantity Demanded (Original) (New) (Unchanging) Price $3.50 36 36-6=30 30 $3.25 34 34-6=28 31 $3.00 32 32-6=26 32 $2.75 30 30-6=24 33 $2.50 28 28-6=22 34 $2.25 26 26-6=20 35 $2.00 24 24-6=18 36 c. Looking again at our table in part b, comparing the quantity demanded and the quantity supplied using the new quantity supplied at the initial equilbrium price of $3.00, quantity demanded is 32 gallons and quantity supplied is 26 gallons. Thus, a shortage of 6 gallons would exist (=32-26).

6. In the market for blue shirts, if people now prefer yellow shirts, a. which curve will shift? b. along which curve will price and quantity move? supply At the new equilbrium, will c. price be higher or lower? lower d. quantity be higher or lower? lower

Explanation a. If people now prefer yellow shirts, the demand for blue shirts will decrease. In other words, the demand curve will shift leftward. b. A decrease in demand moves price and quantity along the unchanging supply curve. c. d. A leftward shift of the demand curve causes a new equilibrium to be established at a lower price and lower quantity.

5. Calculate market quantity demanded and quantity supplied, then answer two questions about equilbrium. Instructions: Enter your responses as a whole number. a. Using the following tables, calculate the market quantity demanded and quantity supplied. b. The equilbrium price is $2. c. Identify the amount of surplus or shortage that would exist at a price of $3. There would be a surplus of 3 units.

Explanation a. Market totals are developed by simply summing the quantities participants want to purchase at each price. In other words, we sume each column. For example, on the demand side, at a price of $5, the market total is equal to 8 (=1+1+2+2+2) b. The equilibrium price is the price at which quantity supplied is equal to quantity demanded. Equilbrium price can be found one of two ways. First, the equilbrium price can be found graphically by identifying where the supply curve and demand curve intersect. Second, using the tables of supply and demand data, identify the price where market quantity demanded equals market quantity supplied. In this example, we can see graphically and using the tables that at a price of $2, quantity supplied is 16 units and quantity demanded is 16 units. Thus, $2 is the equilbrium price and the equilbrium quantity is 16. c. At a price of $3, quantity supplied is 17 units while quantity demanded is 14, Since the quantity supplied is greater than the quantity demanded, a surplus of 3 units exists (=17-14).

8. Given the following data describing the gasoline market, graph the demand and supply curves, then answer three questions about equilibrium. a. Using the data in the table, graph the demand and supply curves. Instructions: Use the tools provided 'Demand' and 'Supply' to plot each line point by point (plot 7 points total for each line) Market for Gasoline Instructions: In parts b and c, round your responses to two decimal places. In part d, enter your response as a whole number. b. What is the equilibrium price? $3.00 per gallon c. If the quantity supplied at every price is reduced by 6 gallons, what is the new equilibrium price? $3.50 per gallon d. If the government freezes the price of gasoline at its initial equilibrium price found in part a, how much of a surplus or shortage will exist when supply is reduced as described in part c? There will be a shortage of 6 gallons

Explanation a. The demand curve is graphed with price on the vertical axis and quantity on the horizontal axis. Each corresponding pair is then plotted. For example, one point is at a price of $2.00 and a quantity demanded of 36, another point is at a price of $2.25 and a quantity demanded of 35, and so on. The supply curve is plotted in the same way where the corresponding pairs of price and quantity supplied are used. b. Equilibrium price is the price at which quantity demanded is equal to quantity supplied. In this case, the equilibrium price is $3.00, where quantity demanded (=32 gallons_) is equal to quantity supplied (=32 gallons). c. To answer this question, it can help to create another data table. The following data table shows the original supply curve, the new supply curve (with quantity supplied decreasing by 6 gallons at every price). and the demand curve. The new equilibrium price is $3.50, which is the price where quantity demanded (=30 gallons) is equal to the new quantity supplied (=30 gallons). Quantity Supplied Quantity Supplied QualityDemanded Price (Original) (New) (Unchanging) $3.50 36 36-6=30 30 $3.25 34 34-6=28 31 $3.00 32 32-6=26 32 $2.75 30 30-6=24 33 $2.50 28 28-6=22 34 $2.25 26 26-6=20 35 $2.00 24 24-6=18 36 d. Looking again at our table in part c, comparing the quantity demanded and the quantity supplied using the new quantity supplied at the initial equilibrium price of $3.00, quantity demanded is 32 gallons and quantity supplied is 26 gallons. Thus, a shortage of 6 gallons would exist (=32-26)

**3. Market Shortage Scalpers Profiting Greatly from Pope's Visit According to the News Wire Instructions: In part a, enter your response as a whole number a. How large was the market shortage at the Church-set price of $0? There was a market shortage of 53000 tickets b. If the Church had sole the tickets for $100, how would have the quantity demanded changed? Quantity demanded would have likely decreased c. If the Church sold the tickets for $100, would the market shortage have been larger or smaller? The market shortage would have likely been smaller d. If the Church sold the tickets for the equilbrium price, would a market shortage exist? NO

Explanation a. The market shortage is the amount by which quantity demanded exceeds quantity supplied at a given price. According to the News Wire, there was a shortage of 53,000 tickets (=93,000 tickets demanded - 40,000 tickets supplied). b. The law of demand tells us that the quantity of a good demanded in a given time period decreases as its price increases, ceteris paribus. If the Church sold the tickets for $100 instead of giving them away for free, then we would predict that because the price is higher, the quantity demanded will decrease. c. The market shortage would be smaller if the tickets were sold for $100. At a price of $100, the quantity demanded would be less than 93,000 tickets, so the shortage (the difference between the quantity demanded and the quantity supplied) would be smaller. d. At the equilibrium price, there is no shortage or surplus. At the equilbrium price, quantity demanded exactly equals quantity supplied.

7. Which curve shifts, and in what direction, when the following events occur in the iPhone market? a. Samsung comes out with a really awesome phone. Demand decreases b. The economy is in a recession Demand decreases c. Apple move its manufacturing facilities to locations that have lower wages Supply increases

Explanation a. The number and availability of alternate phones (substitutes in consumption) increase when a competitor comes out with a new phone. This causes the demand for iPhones to crease (shift to the left) b. Incomes fall when an economy is in a recession. This causes the demand for iPhones to decrease (shift to the left). c. This is an example of a decrease in the cost to produce iPhones. This will cause supply to increase (shift to the right).

**4. Calculate market quantity demanded and quantity supplied, graph market demand and market supply, then answer two questions. Instructions: Enter your responses as a whole number a. Using the following tables, calculate the market quantity demanded and quantity supplied. ( Add each column for each row) Price $5 $4 $3 $2 $1 Market quantity demanded 8 11 14 16 23 Market quantity supplied 26 20 17 16 8 b. Using the table, construct market supply and demand curves. Instructions: Use the tools provided 'Demand' and 'Supply' to plot each line by point (plot 5 points total for each line) c. The equilbrium price is $20 d. Identify the amount of surplus or shortage that would exist at a price of $3 There would be a surplus of 3 units

Explanation a. Market totals are developed by simply summing the quantities participants want to purchase at each price. In other words, we sum each column. For example, on the demand side, at a price of $5, the market total is equal to 8 (=1+1+2+2+2) b. In order to construct market supply and demand curves, market totals with their corresponding prices (calculated in the table) are plotted. For example, ,one point on the market supply curve is at a price of $5 and market supply of 26. The other points along both curves are plotted in a similar manner. c. The equilbrium price is the price at which quantity supplied is equal to quantity demanded. Equilibrium price can be found one of two ways. First, the equilbrium price can be found graphically by identifying where the supply curve and demand curve intersect. Second, using the tables of supply and demand data, identify the price where market quantity demanded equals market quantity supplied. In this example, we can see graphically and using the tables that at a price of $2, quantity supplied is 16 units and quantity demanded is 16 units. Thus, $2 is the equilbrium price and the equilbrium quantity is 16. d. At a price of $3, quantity supplied is 17 units while quantity demanded is 14. Since the quantity supplied is greater than the quantity demanded, a surplus of 3 units exists (=17-14).

**2. Supply Shift Rents Rising in Hurricane's Wake Market for Apartments Based on the News Wire and graph Instructions: Enter your responses as a whole number a. what is the initial (pre-hurricane) equilibrium rent per month? $1000 per month b. What is the pre-hurricane equilbrium quantity? 100 thousand units per month c. how large is the pre-hurricane shortage? 0 thousand units per month e. what is the post-hurricane equilbrium rent? $1200 per month d. what is the post-hurricane equilbrium rent? $1200 per month e. what is the post-hurricane equilbrium quantity? 85 thousand units per month f. how large is the post-hurricane shortage at the pre-hurricane equilbrium rent? 25 thousand units per month

Explanation: a. The initial (pre-hurricane) equilibrium rent is $1,000 per month. It is where the pre-hurricane supply intersects with the market demand curve. b. The pre-hurricane equilibrium quantity is 100 thousand units per month. It is where the pre-hurricane supply intersects with the market demand curve. c. There is no shortage or surplus before the hurricane because the market is in equilibrium. d. The post-hurricane equilibrium quantity is 85 thousand units per month. It is where the post-hurricane supply intersects with the market demand curve. e. The post-hurricane shortage at the pre-hurricane equilibrium price is 25 thousand units per month. It is the difference in the quantity demanded at $1,000 on the market demand curve and the quantity supplied at $1,000 on the post-hurricane supply curve. The quantity demanded is 100 thousand units per month and the quantity supplied is 75 thousand units per month, leading to a shortage of 25 thousand units per month (=100 thousand units per month - 75 thousand units per month).

Ch. 3 HOMEWORK 1. Using the figure as a guide, answer the following questions: Market for Tutoring a. Determine the size of the market surplus or shortage that would exist at a price of $40 There will be a surplus of 50 hours b. Determine the size of the market surplus or shortage that would exist at a price of $20 There will be a shortage of 88 hours.

Explanation: a. At a price of $40 quantity supplied is 125 and quantity demanded is 75. Since quantity supplied is greater than quantity demanded, a **surplus** of 50 hours of tutoring exists (= 125 hours - 75 hours = 50 hours). b. At a price of $20, quantity supplied is 37.5 and quantity demanded is 125. Since quantity demanded is greater than quantity supplied, a **shortage** of 87.5 hours of tutoring exists (=125 hours - 37.5 hours = 87.5 hours).

____________costs are the monetary payments a firm makes to those who provide the resources or inputs to production.

Explicit

Select all that apply What types of costs do firms incur when producing products? Multiple select question. Private Explicit Implicit

Explicit Implicit

Select all that apply What types of costs do firms incur when producing products? Multiple select question. Private Explicit Implicit

Explicit Implicit The distinction between an economic cost and an accounting cost is essentially one between resource and dollar costs. - Dollar cost refers to the explicit dollar outlays made by a producer; it is the lifeblood of accountants. **Economic cost = explicit costs + implicit costs** **Economic cost** refers to the dollar value of all resources used in the production process - lifeblood of economists - The economist takes into consideration implicit costs as well - that is, even those costs for which no direct payment is made. **accountant's dollar costs usually explicit in the sense that someone writes a check economic and accounting costs will diverge whenever any factor of production is not paid an explicit wage (or rent, etc.)

______ and ______ costs are what firms pay for the inputs they use when producing output. Multiple choice question. Explicit; implicit Implicit; opportunity Explicit; accounting Variable; marginal

Explicit; implicit

True or false: If successive units of a good yield smaller and smaller amounts of marginal utility, then the consumer will buy additional units of the good only if its price rises. True false question.TrueFalse

FALSE

Select all that apply Which of the following are types of costs that do not vary with changes in output (i.e., fixed costs)? Multiple select question. Resource inputs Factory rental payments Leases on machinery Labor

Factory rental payments Leases on machinery

Select all that apply Which of the following are examples of implicit costs? Multiple select question. Materials used in the production of the output Forgone rent from a building owned by the business owner Forgone wages for the business owner Utilities

Forgone rent from a building owned by the business owner Forgone wages for the business owner Materials used in the production of the output Reason: The payment of raw materials involves a tangible cost. Forgone rent from a building owned by the business owner Forgone wages for the business owner Utilities Reason: The payment of utilities involves a tangible cost.

The idea that we strive for ever-higher levels of consumption to satisfy basic drives for security, sex, and ego gratifications is the______ perspective of demand. Multiple choice question. sociological economic utilitarian Freudian

Freudian

The idea that we strive for ever-higher levels of consumption to satisfy basic drives for security, sex, and ego gratifications is the _____________perspective of demand.

Freudian, psychological, psychiatric, Freud, psychologists, or psychologist

The idea that we strive for ever-higher levels of consumption to satisfy basic drives for security, sex, and ego gratifications is the ___________perspective of demand.

Freudian, psychological, psychiatric, Freud, psychologists, or psychologist

If product demand is relatively elastic, what will be the effect on the total revenue if the price is increased? Multiple choice question. It stays the same. It cannot be determined. It decreases. It increases.

It decreases Price elasticity and Total Revenue the concept of price elasticity refutes the popular misconception that producers charge the highest price possible. Except in the rare case of completely inelastic demand (E=0), this notion makes no sense. Indeed, higher prices may actually reduce the total sales revenue. The **total revenue** of a seller is the amount of money received from product sales. **It is determined by the quantity of the product sold and the price at which it is sold** **Total revenue = price X quantity sold** **Area of a rectangle is equal to its height, p. times its width, q.**

How will the price elasticity of a product that has few substitutes compare with one that has many substitutes? Multiple choice question. It will be more elastic. It will have the same elasticity. It will be less elastic.

It will be less elastic. Reason: Consider two goods, Reebok sneakers and footwear. Reeboks would be considered "narrowly defined' and has many substitutes and thus is more elastic than footwear, which has no substitutes and is therefore less elastic. **In general, the greater the availability of substitutes, the higher the price elasticity of demand**

How will the price elasticity of demand for a good that is considered to be a luxury compare to one that is a necessity? Multiple choice question. It will exhibit a price elasticity coefficient equal to one. It will exhibit a price elasticity coefficient very close to zero. It will exhibit a price elasticity coefficient less than one. It will exhibit a price elasticity coefficient greater than one.

It will exhibit a price elasticity coefficient greater than one.

Select all that apply Resource inputs used to produce goods and services include: Multiple select question. Labor Land Capital Stocks, bonds, and other financial assets Money Entrepreneurial ability

Labor Land Capital Entrepreneurial ability

Select all that apply Resource inputs used to produce goods and services include: Multiple select question. Land Entrepreneurial ability Labor Money Stocks, bonds, and other financial assets Capital

Land Entrepreneurial ability Labor Capital

Select all that apply Which of the following are examples of fixed costs? (Select all that apply.) Multiple select question. Leased sewing machine payments Fuel for company cars Workers' wages for hourly work Factory rental payments Interest on a firm's debts

Leased sewing machine payments Factory rental payments Interest on a firm's debts

Select all that apply What are the effects of rent control? Multiple select question. Less housing for all An increase in the total number of housing units A decrease in the local population More affordable housing for some

Less housing for all More affordable housing for some rent controls are a price ceiling - an upper limit imposed on the price of a good or service

Select all that apply Which are the two production time periods? Multiple select question. Long run Current period Supply Short run Future period Demand

Long run Short run

_____ is the total quantities of a good that sellers are collectively willing and able to sell at alternative prices in a given time period, ceteris paribus. Multiple choice question. Individual demand Market supply Individual supply Market demand

Market supply

Select all that apply Which of the following are examples of variable costs? (Select all that apply.) Multiple select question. Labor Fuel Rental payments Materials Equipment depreciation

Materials Labor Fuel

Men Teenagers Women Electronic goods, cars, and clothes Education, pets, and personal care items Entertainment, food, and drink

Men Entertainment, food, and drink Teenagers Electronic goods, cars, and clothes Women Education, pets, and personal care items

Match each group with its consumption habits. Instructions Men Teenagers Teenagers drop zone empty. Women Electronic goods, cars, and clothes Education, pets, and personal care items

Men - Entertainment, food, and drink Teenagers - Electronic goods, cars, and clothes Women - Education, pets, and personal care items single women - clothing and pets men - entertainment, food, and drink teens - over $300 a year collectively, electronic goods, cars, clothes Distinctive traits: Bureau of Labor Statistics single men and women living on their own under 25: * Young men have a lot more income to spend ($17,473) than do young women ($13,365) * Young women pile on more credit card debt (average $10,000 per year) than do men ($4,600) * Young men spend a bit less ($2,138) at fast-food outlets, restaurants, and carryouts than do young women ($2,271) * Men spend twice as much on alcoholic beverages and smoking * Men spend nearly twice as much as women on education, clothing, pets, and personal care items * Neither sex spends much on charity, reading, or health care

Select all that apply What are the effects of rent control? Multiple select question. More affordable housing for some Less housing for all A decrease in the local population An increase in the total number of housing units

More affordable housing for some Less housing for all

Select all that apply Which of the following are determinants of market demand? Select all that apply. Multiple select question. Number of consumers in the market Other goods Incomes Expectations Tastes Supply decisions

Number of consumers in the market Other goods Incomes Expectations Tastes

____________cost is the value of the best forgone alternative when we make a decision.

Opportunity

2. Using the demand schedule below, plot the demand curve on the graph and answer four questions about demand and elasticity. a. Illustrate the demand curve on the following graph. Instructions: Use the tool provided 'Demand' to plot the curve point by point (plot 5 points total) Instructions: Enter your responses as a whole number i. $120? $720 ii. $100? $1000 iii. $80? $1200 iv. 60? $1200 v. $40? $1040 Referencing the total revenue calculated in part b, determine if demand is elastic, unitary elastic, or inelastic as the price changes: c. from $120 to $100 a pair Demand is? elastic d. from $80 to $60 a pair Demand is? unitary elastic e. from $60 to $40 a pair Demand is? inelastic

Part c: As the price drops from $120 to $100 a pair, demand is elastic1. Explanation: Note 1: When demand is elastic, total expenditure (TE) increases when the price falls. This is evident from the table provided in part b. above. Refer to the third and fourth rows from the top of the table. Part d: As the price drops from $80 to $60 a pair, demand is unit elastic2. Explanation: Note 2: When demand is unit elastic, total expenditure (TE) remains unchanged when the price falls. This is also evident from the table provided in part b. above. Refer to the fifth and sixth rows from the top of the table. Part e: As the price drops from $60 to $40 a pair, demand is inelastic3. Explanation: Note 3: When demand is inelastic, total expenditure (TE) decreases when the price falls. This is evident from the table provided in part b. above. Refer to the sixth and seventh rows from the top of the table. **The response of consumers to a change in price is measured by the price elasticity of demand** **The price elasticity of demand refers to the percentage change in quantity demanded divided by the percentage change in price** **Price elasticity (E) = percentage change in quantity demanded/ percentage change in price**

Which group of costs is the most accurate example of variable cost? Multiple choice question. Payments for power, transportation services, insurance premiums, and depreciation Payments for materials, fuel, and transportation services Payments for rent, materials, and training Payments for materials, fuel, labor, rent, and interest

Payments for materials, fuel, and transportation services

Which group of costs is the most accurate example of variable cost? Multiple choice question. Payments for materials, fuel, labor, rent, and interest Payments for materials, fuel, and transportation services Payments for power, transportation services, insurance premiums, and depreciation Payments for rent, materials, and training

Payments for materials, fuel, and transportation services

Xbox and PlayStation are what type of goods? Multiple choice question. Independent Substitutes Complementary Inferior

Substitutes

13. Which of the following statements concerning the relationship between total product (TP) and marginal physical product (MPP) is not correct?

TP will fall if MPP is falling So long as MPP is greater than zero, it will be adding to TP at a decreasing rate.

5. Given the table of elasticity estimates and price increases, calculate the percentage decrease in unit sales and then predict if total revenue should increase or decrease based on your calculations. Instructions: Enter your responses as a percentage rounded to one decimal place if necessary. Do not include a negative sign (-) with your answers. Degree of Elasticity Relatively elastic (E > 1) Airline travel, long run Estimate 2.4 Increase in Price (%) 10.0% Decrease in Quantity Demanded 24.0% (%, do not include a negative sign) Roughly unitary elastic (E=1) Shoes Estimate 2.4 Increase in Price (%) 10.0% Decrease in Quantity Demanded 9.0% Relatively inelastic (E< 1) Coffee Estimate 0.3 Increase in Price (%) 10.0% Decrease in Quantity Demanded 3.0% Given the increase in price and your calculated percentage change in quantity demanded, what is the predicted impact on total revenue in each market? Airline travel: total revenue will? decrease Shoes: total revenue will? slightly increase Coffee: total revenue will? increase

Price elasticity of demand (PED)= % change in quantity demanded /% change in price of the good. PED for airline travel (long run) (given) =2.4 % increase in price is 10% (given). Let percentage increase in quantity be X. Substituting in formula, (X/10%) = 2.4 X=.10 x 2.4=0.24 or 24% Percentage change in quantity is 24%. Quantity demanded will decrease by 24% PED is elastic as it is greater than 1. If price rises and PED is elastic than revenue will fall. 2. PED for shoes (given) =0.9 % increase in price is 10% (given). Let percentage increase in quantity be X. Substituting in formula, (X/10%)=2.4 X=.10 x 0.9=0.09 or 9% Percentage change in quantity is 9%. Quantity demanded will decrease by 9% PED is unitary= 1. This means the percentage change in quantity is the same as percentage change in price. When PED is =1, and there is a price increases, revenue is the same. 3. PED for coffee (given) =0.3 % increase in price is 10% (given). Let percentage increase in quantity be X. Substituting in formula, (X/10%)=0.3 X=.10 x 0.03=0.03 or 3% Percentage change in quantity is 3%. Quantity demanded will decrease by 3% Demand is inelastic as it is <1. If price increases, and demand is inelastic then revenue will rise.

Economists distinguish between which two production time periods? Multiple choice question. There are not two conceptual periods. Long run and distant future Short run and long run Immediate run and short run

Short run and long run

Select all that apply Which of the following define ceteris paribus? Multiple select question. The idea that factors other than those being considered in a particular analysis do not change The idea that factors other than those being considered in a particular analysis change That other things remain unchanged (equal)

The idea that factors other than those being considered in a particular analysis do not change That other things remain unchanged (equal)

Select all that apply Which of the following define ceteris paribus? Multiple select question. The idea that factors other than those being considered in a particular analysis change The idea that factors other than those being considered in a particular analysis do not change That other things remain unchanged (equal)

The idea that factors other than those being considered in a particular analysis do not change That other things remain unchanged (equal)

Which of the following defines ceteris paribus? Multiple choice question. The idea that, in a particular analysis, "additional" factors, other than those under consideration, play a significant role in said analysis. The idea that factors other than those being considered in a particular analysis do not change (nothing else changes). In a particular analysis, "additional" factors, other than those under consideration, are given equal consideration when factored into an analysis.

The idea that factors other than those being considered in a particular analysis do not change (nothing else changes).

Select all that apply A firm's total costs of producing a specific output depend on which of the following? Multiple select question. The range of resource possibilities. The quantities of resources required to produce a given output. The quality of resources given up to produce another good or service. The market value of the needed resources required to produce a given output.

The market value of the needed resources required to produce a given output. The quantities of resources required to produce a given output.

Select all that apply A firm's total costs of producing a specific output depend on which of the following? Multiple select question. The quantities of resources required to produce a given output.** The quality of resources given up to produce another good or service. The range of resource possibilities. The market value of the needed resources required to produce a given output.**

The quantities of resources required to produce a given output. The market value of the needed resources required to produce a given output.

What is the definition of total cost? Multiple choice question. The sum of the fixed costs at each level of output The sum of the variable costs at each level of output The average of all resource costs used to produce a good or service The sum of all resource costs used to produce a good or service

The sum of all resource costs used to produce a good or service The market value of all resources used to produce a good or service.

____________cost is the sum of all resources used to produce a good or service.

Total

A relatively large percentage change in quantity demanded divided by a relatively smaller change in price yields relatively price __________ (elastic/inelastic) demand.

elastic

Demand for Nike shoes is more ______ than overall demand for shoes. Multiple choice question. inelastic unit-elastic perfectly elastic elastic

elastic

17. You have just begun a lawn care business and have purchased one electric lawn mower, one trimmer, and one rake. You have hired two employees to help with the work. Why might you begin experiencing diminishing returns as you hire additional workers?

You do not have sufficient capital resources to support the additional workers Once you have more workers than tools for them to use, the workers will be less productive because they have to wait to use the tools

4. Which of the following situations is sufficient to represent current demand for a car?

You have enough money to buy it and you are willing to spend the money on the car Demand exists only if someone willing and currently able to pay for the goods

66 of 82

Your most challenging concepts Define elastic. State the determinants of demand. Recall that consumer choices are influenced by the marginal utility and budget.

66 of 74

Your most challenging concepts Identify market participants. Exemplify the difference between a change in demand and a change in quantity demanded. Describe the free-market response to a natural disaster such as a hurricane.

66 of 75

Your most challenging concepts Summarize the factors of production. Explain the components of total cost. Identify some examples of variable costs.

shift in demand

a change in the quantity demanded at any (every) price

demand curve

a curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus.

When the price elasticity of demand for a product is elastic, a modest change in price causes _____ change in the quantity demanded. Multiple choice question. a lower a larger no change an equal

a larger **REASON Whether a price increases or decreases, the change in price will cause a larger change in quantity demanded**

When the price elasticity of demand for a product is elastic, a modest change in price causes _____ change in the quantity demanded. Multiple choice question. a lower an equal no change a larger

a larger Reason: Whether a price increases or decreases, the change in price will cause a larger change in quantity demanded.

A technological relationship expressing the maximum quantity of a good attainable from different combinations of factor inputs is known as Multiple choice question. the supply curve a production function capacity efficiency

a production function

The purpose of _____ is to tell us just how much output we can produce with varying amounts of factor inputs. Multiple choice question. efficiency economics marginal productivity a production function

a production function

Changes in the determinants of demand will cause: Multiple choice question. a movement along the demand curve neither a shift in the demand curve nor a movement along it a shift of the demand curve both a shift of the demand curve and a movement along it

a shift of the demand curve the demand schedule and curve remain unchanged ONLY so long as the underlying determinants of demand remain constant. If the ceteris paribus assumption is violated - if tastes, income, other goods, or expectations change - the ability or willingness to buy will change. When this happens, the demand curve will shift to a new position. This is referred to as a shift in demand.

demand schedule

a table showing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus.

26. Demand is defined as the

ability and willingness to buy specific quantities of a good or service at alternative prices in a given time period, ceteris paribus Demand relies on both your want for a good or service and your ability to pay for it

If you purchase the factory that you are currently using, the ______ cost will change. Multiple choice question. explicit opportunity accounting net accounting

accounting

9. If the first, second, third, and fourth worker employed by the firm add 15, 21, 12, and 8 units of total product respectively, we can conclude that

after the second worker marginal product declines At first marginal physical product increases, but eventually the law of diminishing returns will cause marginal physical product to decline

The highest-valued alternative that is given up or sacrificed when choosing to produce or consume one good over another is referred to as _____. Multiple choice question. an opportunity cost an accounting cost a fixed cost a variable cost an economic choice

an opportunity cost

**factor market**

any place where factors of production (e.g. land, labor, capital, entrepreneurship) are bought and sold. In factor markets, factors of production are exchanged. Market participants buy or sell land, labor, or capital that can be used in the production process. i. e. go to work - your labor is factor of production offer to sell your time and talent producters hire or buy your services skills price they are willing to pay

factor market

any place where factors of production (e.g. land, labor, capital, entrepreneurship) are bought and sold. In factor markets, factors of production are exchanged. Market participants buy or sell land, labor, or capital that can be used in the production process. When you look for work, you are making a factor of production - your labor - available to producers. You are offering to sell your time and talent. The producers will hire you - buy your services in the factor market - if you are offering the skills they need at a price they are willing to pay

**product markets**

any place where finished goods and services (products) are bought and sold buy products = reversed roles - customers doing buying businesses doing selling. exchange of goods and services occurs in product markets

product market

any place where finished goods and services (products) are bought and sold. Consumers do the buying businesses do the selling - this exchange of goods/services occurs in product markets

**market**

any place where goods are bought and sold to maximize the returns on our limited resources, we participate in the **market** buying and selling various goods

market

any place where goods are bought and sold to maximize the returns on our limited resources, we participate in the market, buying and selling various goods and services

6. According to the law of demand

as the price of a good falls, the quantity demanded will increase in a given time period, ceteris paribus The law of demand suggests an inverse relationship between price and quantity demanded, holding all other factors fixed.

Which of the following curves first falls and then rises? Multiple choice question. average total cost marginal physical product fixed cost total cost

average total cost

Select all that apply The two most important costs a firm needs to understand to make profitable production decisions include Multiple select question. average total cost marginal cost total cost fixed cost

average total cost marginal cost to answer the questions of how much to charge to earn profit and high enough to cover some portion of fixed costs

The initial dominance of the falling average fixed costs combined with the later rising marginal costs causes the ______ to be U-shaped. Multiple choice question. total cost curve supply curve production function average total cost curve

average total cost curve

The equilibrium price reflects a compromise between ___________and ___________.

buyers or demand sellers or supply The equilibrium price and quantity reflect a compromise between buyers and sellers. No other compromise yields a quantity demanded that is exactly equal to the quantity supplied.

When an economy falls into recession and people are losing jobs, demand for most products, especially big-ticket items, ________________(increases/decreases).

decreases, declines, falls, drops, or lowers

The ability and willingness to buy specific quantities of a good at alternative prices in a given time period ceteris paribus is the definition of ____________. (Enter one word in the blank.)

demand

The ability and willingness to buy specific quantities of a good at alternative prices in a given time period ceteris paribus is the definition of demand ____________ (Enter one word in the blank.)

demand

The market ___________for a good is simply the sum of all individual consumer demands.

demand **market demand for a good is simply the sum of all individual consumer demands**

According to the law of __________ there is an inverse relationship between price and quantity.

demand **The inverse relationship between price and quantity is so common that we refer to it as the law of demand**

The ability and willingness to buy specific quantities of a good at alternative prices in a given time period ceteris paribus is the definition of __________. (Enter one word in the blank.)

demand The ability and willingness to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus

Every market transaction involves elements of: Multiple select question. Demand Money Reason: Although most transactions involve money, market transactions can also be by barter. Supply Barter Reason: Although most transactions involve money, market transactions can also be by barter.

demand supply

A table showing the quantities of a good that a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus, is a: Multiple choice question. demand schedule. market. demand curve. supply schedule.

demand schedule

A table showing the quantities of a good that a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus, is a __________schedule.

demand schedule - a table showing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus. demand

Advertisers seek to shift the ______ curve by changing the ______ of consumers. Multiple choice question. supply, income demand, income supply, tastes demand, tastes

demand, tastes

A shortage results from an excess of quantity _____________.

demanded or demand market shortage - the amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand. excess of quantity demanded over quantity supplied

A demand curve measures quantity ______ on the horizontal axis and ______ on the vertical axis. Multiple choice question. price; quantity demanded demanded; quantity supplied demanded; price supplied; quantity demanded

demanded; price

The ___________of supply are any factors other than the product's _____________that have an effect on the supply of a good or service and cause the supply curve to shift.

determinants or shifters price

Assuming some inputs are fixed and cannot change, if beyond some point of production, a firm experiences decreased output when hiring one more worker, then the firm is experiencing the law of Multiple choice question. diminishing marginal returns. supply. diminishing marginal costs. diminishing marginal utility.

diminishing marginal returns.

If Janae notices that each apple she eats through the day yields a smaller amount of additional satisfaction, she is noticing the law of: Multiple choice question. diminishing total utility diminishing marginal utility diminishing supply diminishing cost

diminishing marginal utility

Assuming other inputs are fixed and cannot change, if beyond some point of production, a firm experiences declining units of additional output with each additional unit of labor input, then the firm is experiencing the law of Multiple choice question. diminishing utility. diminishing costs. supply. diminishing returns.

diminishing returns

The ______ is the value or worth of all resources used to produce the good or service. Multiple choice question. explicit cost implicit cost economic cost absolute cost

economic cost

Quantity demanded is illustrated on the ______ axis, while price is illustrated on the ______ axis. Multiple choice question. horizontal (x); vertical (y) vertical (y); horizontal (x) vertical (x); horizontal (y) horizontal (y); vertical (x) old_demand(6681704e).jpg Text Alternative The horizontal axis ranges from 0 through 20 in increments of 1. The vertical axis ranges from 0 through 50 in increments of 5. The data is as follows: The curve decreases from (1, 50) at A to (20, 10) at I through A, B, C, D, E, F, G, and H. The point at D is highlighted and falls at (5, 35). The label on the right reads: "As price falls, the quantity demanded increases." Note: All data is approximate

horizontal (x); vertical (y) Reason: The x axis is known as the horizontal line, while the y axis is known as the vertical line.

MODULE 2 QUIZ 1. The largest portion of the average U.S. consumer's dollar is spent on

housing Housing is the largest single portion of consumer spending, at approximately 33 cents of every dollar of overall spending

2. Which of the following ranks the top three components of U.S. consumption correctly from largest to smallest?

housing, transportation, food The largest portion of consumer spending goes toward necessities

Forgone entrepreneurial income is an example of a(n) Multiple choice question. explicit cost payment made to an entrepreneur marginal cost implicit cost

implicit cost

If you quit your job to start your own business, your forgone wages from your former job become part of the ______________costs of your business.

implicit or opportunity

Select all that apply The determinants of demand include: Multiple select question. cost of production income expectations tastes the availability and prices of other goods

income expectations tastes the availability and prices of other goods

Select all that apply The determinants of demand include: Multiple select question. number of sellers income cost of production expectations tastes

income, expectations, and other goods **income expectations tastes** market demand for a good is simply the sum of all individual consumer demands the market demand for a specific product is determined by * tastes (desire for this and other goods) * income (of consumers) * expectations (for income, prices, tastes) * other goods (their availability and price) * the number of consumers in the market

If two goods are substitutes and the price of one good increases, then the demand for the other good will ______. Multiple choice question. decrease increase shift to the left stay the same

increase **The demand for substitute goods increases (shifts to the right) when the price of a product goes up.

30. A firm's rising factor costs can be offset by

increases in productivity As firm factor costs rise, hiring an additional factor of production becomes more expensive. If the firm wants to produce the same amount and keep costs the same, the only way it could do so is if each factor of production employed becomes more productive.

The supply curve is an upward-sloping curve because as price ______, the producer will be willing to supply ______ of the product. Multiple choice question. increases; less decreases; more decreases; the same amount increases; more

increases; more

A price increase will increase total revenue if the price elasticity of demand is relatively price (elastic/inelastic).

inelastic

If a 4% decrease in the price of coffee leads to a 2% increase in the quantity demanded, the price elasticity of demand for coffee is relatively price _________(inelastic/elastic).

inelastic

If a 6% decrease in the price of sugar leads to a 4% increase in the quantity demanded, the price elasticity of demand for sugar is relatively price ______. Multiple choice question. unitary elastic elastic inelastic elasticity dependent

inelastic **The central question in all these decisions is the response of quantity demanded to a change in price ** **The response of consumers to a change in price is measured by the price elasticity of demand** **The price elasticity of demand refers to the percentage change in quantity demanded divided by the percentage change in price**

Along a typical demand curve, as price falls total revenue Multiple choice question. initially increases then decreases remains constant initially decreases then increases continuously decreases

initially increases then decreases

Along a typical demand curve, as price rises total revenue Multiple choice question. initially increases then decreases initially decreases then increases continuously increases remains constant

initially increases then decreases

With substitute goods, an increase in the price of one good will cause consumers to buy _________(more/less) of the other good.

more, bigger, or larger

A brand-name product has ______ substitutes than a product in general and is thus more ______. Multiple choice question. fewer; elastic more; elastic more; inelastic fewer; inelastic

more; elastic

All of the following goods or services would most likely exhibit relatively inelastic demand, except Multiple choice question. Milk Gasoline New cars Insulin (a medicine) Electricity

new cars

If the price elasticity of demand is unitary elastic, an increase or decrease in price will ______ total revenue. Multiple choice question. decrease, then increase not change decrease increase

not change

Select all that apply The market demand for a specific product is determined by Multiple select question. number of consumers in the market technology number of suppliers in the market expectations availability and price of other goods tastes income

number of consumers in the market expectations availability and price of other goods tastes income tastes (desire for this and other goods) Income (of consumers) Expectations (for income, prices, tastes Other goods (their availability and price) the number of consumers in the market

Average total cost equals total cost divided by total _____. Multiple choice question. revenue fixed costs costs output

output

Marginal ___________product is the contribution of each worker to production as measured by the change in total output that occurs when the worker is employed.

physical

When total utility is increasing, we can conclude that marginal utility is: Multiple choice question. zero negative constant positive

positive

Capacity is the concept that resource constraints place a ceiling on Multiple choice question. average output marketable output potential output minimum output

potential output

The only factor that causes a movement along the supply curve is a change in: Multiple choice question. subsidies technology price taxes

price Shifts in Supply As with demand, there is nothing sacred about any given set of supply intentions. Supply curves shift when the underlying determinants of supply change. * Changes in quantity supplied: movements along a given supply curve * Changes in supply: shifts of the supply curve If the price of tutoring services is the only thing changing, then we can **track changes in quantity suppied along the supply curve.** But, if ceteris paribus is violated - if technology, factor costs, other goods, taxes, or expectations change - then **changes in supply are illustrated by shifts of the supply curve**

The law of demand refers to the inverse (negative) relationship between ____________and quantity.

price This inverse relationship between price and quantity is so common that we refer to it as the law of demand. law of demand - the quantity of a good demanded in a given time period increases as its price falls, ceteris paribus. price

11. As the marginal utility of a good diminishes, so does the

price consumers are willing to pay If the satisfaction with a product decreases, consumers will not be as willing to purchase the product. In other words, the price the consumer is willing to pay for additional units of the produce will decrease.

The ability and willingness to Blank______ specific quantities of a good at alternative prices in a given time period, ceteris paribus, is known as supply. Multiple choice question. produce purchase decrease increase

produce

The ability and willingness to Blank______ specific quantities of a good at alternative prices in a given time period, ceteris paribus, is known as supply. Multiple choice question. purchase produce increase decrease

produce

The ability and willingness to ______ specific quantities of a good at alternative prices in a given time period, ceteris paribus, is known as supply. Multiple choice question. purchase increase produce decrease

produce

When modeling market interactions, Multiple choice question. producers demand goods and services consumers demand factors of production producers demand factors of production consumers supply goods and services

producers demand factors of production

16. A market in which finished goods and services are exchanged is a

product market The exchange of final goods and services occurs in the product market

Multiple Select Question Select all that apply Which of the following are markets or market participants? Multiple select question. product market businesses component market consumers factor market

product market businesses consumers factor market

Select all that apply Which of the following are markets or market participants? Multiple select question. product market consumers component market factor market businesses

product market consumers factor market businesses

A technological relationship expressing the maximum quantity of a good attainable from different combinations of resources is a _________function.

production function a technological relationship expressing the maximum quantity of a good attainable from different combinatinos of factor inputs.

Improvements in _____ will shift the production function upward. Multiple choice question. resource cost prices productivity implied costs

productivity

The difference between total revenue and total cost is Multiple choice question. fixed costs profit variable costs diminishing returns

profit

Total revenue minus total cost is: Multiple choice question. total output marginal cost profit the law of diminishing returns

profit

The utility of a good is the __________one gets from consuming a good or service.

satisfaction, pleasure, or happiness expected pleasure, or satisfaction, obtained from goods and services

The fact that you do not have enough income to buy all the goods and services you want is the idea of: Multiple choice question. scarcity demand opportunity cost supply

scarcity

A change in _____ refers to a movement along the demand curve for cars in response to changes in the price of cars, whereas a change in ______ refers to a shift of the demand curve for cars leftward or rightward in response to anything other than changes in the price of cars. Multiple choice question. quantity supplied; supply quantity demanded; demand supply; quantity supplied demand; quantity demanded

quantity demanded; demand **Movements along a demand curve are a response to price changes for that good.** Such movements assume that determinants of demand are unchanged. By contrast, **shifts of the demand curve occur when the determinants of demand change.** When tastes, income, other goods, or expectations are altered, the basic relationship between price and quantity demanded is changed (i.e. shifts) **Changes in quantity demanded:**movements along a given demand curve in response to price changes of that good (such as from d1 to d3 in Figure 3.3_ **Changes in demand:** shifts of the demand curve due to changes in tastes, income, other goods, or expectations (such as from D1, to D2 in Figure 3.3

A change in _____ refers to a movement along the demand curve for cars in response to changes in the price of cars, whereas a change in ______ refers to a shift of the demand curve for cars leftward or rightward in response to anything other than changes in the price of cars. Multiple choice question. supply; quantity supplied quantity demanded; demand demand; quantity demanded quantity supplied; supply

quantity demanded; demand Movements along a demand curve are a response to price changes for that good. Such movements assume that determinants of demand are unchanged. By contrast, shifts of the demand curve occur when the determinants of demand change. When tastes, income, other goods, or expectations are altered, the basic relationship between price and quantity demanded is changed (i.e. shifts). **Changes in quantity demanded:** movements along a given demand curve in response to price changes of that good (such as from d1 to d3 in Fig 3.3 **Changes in demand:** shifts of the demand curve due to changes in tastes, income, other goods, or expectations (such as from D1 to D2 in Fig 3.3

A surplus is also known as an excess of ______. Multiple choice question. imports quantity demanded capital quantity supplied

quantity supplied

On which item do men and women spend the least? Multiple choice question. Cars Entertainment Reading Pets

reading

Profit is the difference between total ______ and total Blank______. Multiple choice question. revenue; variable costs revenue; fixed costs fixed costs; variable costs revenue; costs

revenue; costs **A firm's goal is to maximize profits, not production.** **The most desirable rate of output is the one that maximizes total profit - the difference between total revenue and total costs**

Which of these goods have relatively elastic demand? Multiple choice question. Rib eye steak Milk Gasoline Prescription drugs

rib eye steak **Demand for luxury goods is relatively elastic** **Demand for necessities is relatively inelastic**

How might a natural disaster such as hurricane Harvey impact an unregulated market for bottled water? The damage inflicted would most likely cause a Multiple choice question. rightward shift of the market supply curve. leftward shift of the market supply curve. rightward shift of the market demand curve. leftward shift of the market demand curve.

rightward shift of the market demand curve.

How might a natural disaster such as hurricane Harvey impact an unregulated market for bottled water? The damage inflicted would most likely cause a Multiple choice question. rightward shift of the market demand curve. leftward shift of the market supply curve. rightward shift of the market supply curve. leftward shift of the market demand curve.

rightward shift of the market demand curve. high price would move consumers up the market demand curve and water companies up the market supply curve * an increase in demand shift the demand curve rightward * a decrease in demand shifts the demand curve leftward * when supply increases, the supply curve shifts rightward * when supply decreases, the supply curve shifts leftward

Variable costs ____________(increase/decrease) with increases in output.

rise, increase, change, or increases

If prices for houses are expected to increase in the future, demand for houses will ______ today. If house prices are expected to decrease in the future, demand will ______ today. Multiple choice question. rise; not change fall; rise rise; rise fall; fall rise; fall

rise; fall

It is generally observed that as more of a product is consumed, total utility ______, reaches a maximum, and then ______. Multiple choice question. rises; falls falls; rises at an increasing rate falls; rises rises; rises at an increasing rate

rises; falls

So long as marginal utility is positive, total utility must be Multiple choice question. neither rising nor falling rising falling negative

rising **So long as marginal utility is positive, total utility must be increasing**

The market demand curve is the _____ of all individual demand curves for a good or service. Multiple choice question. sum product subtraction division

sum SWhat we start with in product markets, then, is many individual demand curves. Then we combine all those individual demand curves into a single market demand. Combined (market) demand for hours of design services be at that price? Our combined willingness to buy - our collective market demand - is nothing more than the sume of our individual demands. The same kind of aggregation can be performed for all the consumers in a particular market. The resulting market demand is determined by the number of potential buyers and their respective tastes, incomes, other goods, and expectations.

23. The market demand curve is calculated by

summing the quantities demanded from individual demand curves at all prices The market demand curve is defined as the sum of the individual demand curves

Ch. 5 The ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus, is known as Multiple choice question. marginal cost profit maximization demand supply

supply

The ability and willingness to sell specific quantities of a good at alternative prices in a given time period, ceteris paribus, is the definition of ____________.

supply

The number of sellers or competitors in a market is a determinant of ______(one word).

supply

A change in either __________or ____________will cause a change in equilibrium.

supply demand

When modeling market interactions, consumers ______ factors of production and ______ products. Multiple choice question. demand; supply demand; demand supply; supply supply; demand

supply; demand

18. Which of the following is NOT a determinant of demand for a good?

technological advances All of them are determinants of demand for a good except technological advances, which is a determinant of supply

**demand**

the ability and willingness to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus **demanding** goods when shop supermarket - prepared offer dollars in exchange for something to eat business firms supply goods/services in product markets same time **demanding** factors of production in **factor markets** **whether on side of supply or demand of any market transaction depends on nature of exchange, not people or institutions involved**

demand

the ability and willingness to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus.

supply

the ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus

**supply**

the ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus supply resources to market when look for a job business supply goods/services in product markets while same time demanding factors of production in factor markets **Whether one is on the supply side or the demand side of any particular market transaction depends on the nature of the exchange, not on the people or institutions involved**

27. Marginal physical product is

the additional output from using one more unit of labor Marginal physical product is equal to the change in total product divided by the change in the quantity of resource applied

market shortage

the amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand

market surplus

the amount by which the quantity supplied exceeds the quantity demanded at a given price; excess supply.

**ceteris paribus**

the assumption that nothing else changes if a demand is in fact such a multidimensional decision, how can reduce it to only two dimensions of price and quantity? ceteris paribus to simplify models of world, economists focus only on one or two forces at a time and **assume** nothing else changes. **focus on the relationship between quantity demanded and price** **The ceteris paribus assumption is not as far-fetched as it may seem. People's tastes (desires) don't change very quickly. Income tends to be fairly stable from week to week. Expectations for future slow to change. The price of a good may be the only thing that changes on any given day

Select all that apply Consider the relationship between the price of gas and the quantity of gas consumed by drivers. If we are to consider the price of gas as the only factor affecting the quantity of gas consumed, while holding other factors such as drivers' incomes and tastes and preferences irrelevant, then we are invoking: Multiple select question. economic theories the assumption that nothing else changes the law of supply ceteris paribus economic generalizations

the assumption that nothing else changes ceteris paribus

ceteris paribus

the assumption that nothing else changes.

Marginal cost is ______. Multiple choice question. the additional cost associated with increasing fixed inputs total cost divided by output the change in total cost divided by the change in output the increase in output divided by the increase in total cost

the change in total cost divided by the change in output

The relationship between price and quantity demanded is exemplified by ______. Multiple choice question. the demand curve the supply curve the monetary income of the consumer changes in the wants of the consumer

the demand curve