econ 201 exam #1

The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the

amount of the other good that must be given up

Which of the following might cause the supply curve for an inferior good to shift to the right?

an improvement in production technology that makes production of the good more profitable

Which of the following might cause the demand curve for an inferior good to shift to the left?

an increase in the price of a complement

If the demand for a product increases and supply does not change, then we would expect equilibrium price

and equilibrium quantity both to increase

If textbooks and study guides are complements, then an increase in the price of textbooks will result in:

fewer study guides being sold

Other things equal, the demand for a good tends to be more price inelastic when

fewer substitutes are available.

The price elasticity of demand (also called own-price elasticity of demand) measures

how much more of a good consumers will demand when incomes rise

An economy's production of two goods is efficient if:

it is impossible to produce more of one good without producing less of the other

A group of buyers and sellers of a particular good or service is called a(n):

market

a production possibilities frontier is a straight line when:

resources are equally productive for both goods

The overriding reason why households and societies face many decisions is that:

resources are scarce

The overriding reason why households and societies face many decisions is that:

resources are scarce.

A production possibilities frontier is bowed outward when:

resources that are not equally productive for both goods creates an increasing opportunity cost as more of one good is produced.

an increase in quantity supplied:

results in a movement upward and to the right along a fixed supply curve.

Cost is a measure of the

seller's willingness to sell

A supply curve can be used to measure producer surplus because it reflects:

sellers' costs.

When quantity supplied increases at every possible price, we know that the supply curve has:

shifted to the right

Income elasticity of demand measures how:

the quantity demanded changes as consumer income changes

Economists typically measure efficiency using:

total surplus

High-school athletes who skip college to become professional athletes:

understand that the opportunity cost of attending college is very high for them.

Factors of production are:

used to produce goods and service

the factors of production are:

used to produce goods and services

Total surplus in a market is equal to:

value to buyers - costs of sellers

Which of the following is not one of the basic questions in economics?​

​Why do we have resources?

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?

Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous

Factors of production are

inputs into the production process

Factors of production are:

inputs into the production process.

Another term for factors of production is:

inputs

Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is

$150

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a:

3.6 percent increase in the quantity demanded

If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quantity of lattés if the price of cappuccinos falls?

Both the equilibrium price and quantity would decrease.

What will happen in the gasoline market now if buyers expect higher gasoline prices in the near future?

The demand for gasoline will increase.

Which of the following demonstrates the law of supply?

When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

a 13.33 percent increase in the price of the good

If the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity demanded must be the result of:

a 15 percent decrease in the price.

Which of the following changes would not shift the demand curve for a good or service?

a change in the price of the good or service

When demand is elastic, an increase in price will cause

a decrease in total revenue

Market failure is the inability of:

a market to allocate resources efficiently

If a shortage exists in a market, then we know that the actual price is:

below the equilibrium price, and quantity demanded is greater than quantity supplied.

Total surplus is represented by the area:

between the demand and supply curves up to the point of equilibrium

Suppose that the market price for pizzas increases. The increase in producer surplus comes from the benefit of the higher prices to

both existing sellers who now receive higher prices on the pizzas they were already selling and new sellers who enter the market because of the higher prices

In economics, capital refers to:

buildings and machines used in the production process

Demand is said to be price elastic if:

buyers respond substantially to changes in the price of the good

The line that relates the price of a good and the quantity supplied of that good is called the supply:

curve, and it usually slopes upward

You have been asked by your economics professor to graph the market for lumber and then to analyze the change that would occur in equilibrium price as a result of recent forest fires in the west. Your first step would be to

decide whether the fires affected demand or supply

A movement downward and to the left along a supply curve is called a(n):

decrease in quantity supplied

A movement downward and to the left along a supply curve is called a(n)

decrease in quantity supplied.

A movement downward and to the left along a supply curve is called a(n):

decrease in quantity supplied.

what events must cause equilibrium quantity to rise?

demand and supply both increase

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between:

efficiently and equality

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

enhance equality

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to:

fall by 50%

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the:

income elasticity of demand is negative

In a market economy, economic activity is guided by:

individuals acting in self-interest

The principle that "people face tradeoffs" applies to:

individuals, families, and societies

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is:

positive, and the good is a normal good.

As we move downward and to the right along a linear, downward-sloping demand curve:

slope remains constant but elasticity changes

As we move downward and to the right along a linear, downward-sloping demand curve,

slope remains constant but elasticity changes.

As we move downward and to the right along a linear, downward-sloping demand curve:

slope remains constant but elasticity changes.

A microeconomist — as opposed to a macroeconomist — might study

the effect of new regulations on production in the pulp and paper industry.

Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is:

the enjoyment he would have received if he had watched TV with his friends.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that:

the nation is not using all available resources or is using inferior technology or both

Which of the following is a determinant of the market supply curve but not a determinant of an individual seller's supply?

the number of sellers

Which of the following is not a determinant of the price elasticity of demand for a good?

the steepness of the supply curve for the good

A university's football stadium is always sold out, and students who wait in line for hours may be turned away. This indicates:

the ticket price is below the equilibrium price

if the cross-price elasticity of demand for two goods is -4.5, then:

the two are complements

If the cross-price elasticity of demand for two goods is -4.5, then:

the two goods are complements

When the price of a good or service changes:

there is a movement along a given demand curve

When the price of a good or service changes

there is a movement along a given supply curve

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that:

there is deadweight loss in the market

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that:

there is deadweight loss in the market.