econ 200 exam 1

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true

BMW constructing a new assembly plant in south carolina is an example of a long run adjustment

False

Income and substitution effects account for an upward sloping supply curve

false

a decrease in supply of X increases the equilibrium price of X, which reduces the demand for X and automatically returns the price of X to its initial level

false

a firms economic profit is usually higher than its accounting profit

true

a government subsidy per unit of output increases supply

false

a linear demand curve has a constant elasticity over the full range of the curve

true

a local bakery hiring two additional workers is an example of a short run adjustment

false

an economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy

false

an economy cannot produce at a point outside of its production possibilities curve because human economic wants are insatiable

true

an increase in demand accompanied by an increase in supply will increase the equilibrium quantity but the effect on equilibrium price will be indeterminate

false

an increase in quantity supplied might be caused by an increase in production costs

true

at zero units of output a firms variable costs are zero

true

average fixed costs diminish continuously as output increases

false

because economic generalizations are simplifications from reality, they are impractical and useless

false

by an increase in demand we mean a leftward shift of the demand curve

true

choices entail marginal costs because resources are scarce

true

consumers buy more of normal goods as their incomes rise

true

diseconomies of scale stem primarily from the difficulties in managing and coordinating a large scale business enterprise

False

economic profit is found by subtracting accounting costs from total revenue

true

generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities

true

given a downsloping demand curve and an upsloping supply curve for a product, an increase in the price of a substitute good will increase equilibrium price and quantity

true

if demand increases and supply simultaneously decreases, equilibrium price will rise

false

if economic theories are solidly based on relevant facts, then appropriate economic policy becomes obvious and uncontroversial

true

if price and total revenue are directly related, demand is inelastic

true

if the demand for wheat is highly inelastic, an extraordinary large crop may reduce farm incomes

true

if the marginal utility of the last unit of A consumed is 12 and the marginal utility of the last unit of B consumed is 8 then a price of A of $6 and a price of B of $4 would be consistent with consumer equilibrium

true

if the marginal-cost curve lies below the average-variable-cost curve, the average variable cost curve must be falling

true

in economics, a firm earns a normal profit when its total revenue equals its total economic costs

true

in the long run there are no fixed costs

true

marginal analysis means that decisions-makers compare the extra benefits wight the extra costs of a specific choice

false

marginal product is the total product divided by the number of workers employed

false

normal statements are expressions of facts

false

positive statements are expression of value judgements

false

price elasticity of demand measures the slope of the demand curve

true

products and services are scarce because resources are scarce

true

rational individuals may make different choices because their preferences and circumstances differ

false

supply refers to the amount of a product that a producer will offer in the market at some particular price

false

surpluses drive market prices up; shortages drive them down

false

the law of diminishing returns explains the diseconomies of scale

true

the law of diminishing returns explains why short run marginal cost curves are upward sloping

False

the law of diminishing returns explains why the long-run average total cost curve is U-shaped

true

the production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment

false

the rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market

true

the real opportunity cost of producing product X is the amounts of products Y,Z, and so forth, that might have been produced if resources had not been used to produce X

False

the short run is a period of time during which all costs are fixed costs

false

the smaller the number of good substitutes for a product, the great will be the price elasticity of demand for it

false

toothpaste and toothbrushes are substitute goods

true

used clothing is a good example of an inferior good

true

variable costs are costs that vary directly with output

False

when a firm decides to produce no output in the short run its costs will be zero


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