ECO105 Final Exam Test 1

If we observe both an increase in the price of beach balls and a decrease in the quantity of beach balls bought and sold, a likely explanation is that the

supply of beach balls has decreased

Farmland can be used to produce either cattle or corn. If the price of cattle rises, the

supply of corn will decrease

A given percentage increase in the price of a product will cause a smaller percentage decrease in quantity demanded

the easier it is to find good substitutes

As you shift your time away form alternative uses in order to work,

the marginal cost of your time increases

Reading a demand curve "up and over" tells you

the maximum amount consumers are willing to pay for a given quantity

In a voluntary exchange,

the price must be greater than the marginal opportunity cost of the seller and less than the marginal benefit of the buyer

The "miracle of markets" is that

we get the products and services we want as a result of individual decisions made by complete strangers

When sellers expect a higher future price, then today's

supply decreases

It takes mom 30 minutes to cook dinner. In the same time, she can iron 6 shirts. Dad takes an hour to cook dinner and 30 minutes to iron a single shirt. In this situation

Dad should cook dinner; the opportunity cost is only 2 shirts

Which statement is true about marginal benefit?

For supply, marginal benefit is measured in dollars

Because of scarcity, we must give up some of one product in order to get more of another. This is the concept of

Opportunity Cost

Which cannot cause an increase in demand for a service?

a decrease in the price of a substitute

If Kraft Dinner is an inferior good, then a rise in the price of Kraft Dinner will cause a

decrease in the quantity demanded

For economists, the term wants and demands

do not mean the same thing

If an increase in price causes a decrease in total revenue, then price elasticity of demand is

greater than zero but less than one

If an increase in price causes an increase in total revenue, then price elasticity of demand is

greater than zero but less than one

Demand will be more elastic the

greater the fraction of income spent on the product/ service

People take their parents for granted because parents typically have

high total benefits and low marginal benefits

A decrease in the wages of farm workers who harvest coffee beans will

increase the supply of coffee

People who cannot find work during a recession often enroll in school. An economic explanation is that attending school during a recession has a

lower marginal opportunity cost

The high price of diamonds relative to the price of water is due to the fact that

marginal benefits from diamonds are relatively high

To hire an input, a business owner must pay a price that

matches the best opportunity cost of the input owner

At the equilibrium price, business inventories are

stable

Market supply is the

sum of quantities supplied by all businesses at each price

Market demand is the

sum of the quantities demanded by all individuals at each price