econ 202

The supply of a good or service is determined by

those who sell the good or service

economists use some familiar terms in specialized ways

to provide a new and useful way of thinking about the world

When society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing

scarcity

a perfectly inelastic demand implies that buyers

purchase the same amount as before when the price rises or falls (insulin)

the study of how the allocation of resources affects the economic well being is called

welfare economics

A positive economic statement such as "Pollution taxes decrease the quantity of pollution generated by firms" a: could not be evaluated by economists acting as scientists b: would likely be made by an economist acting as a policy advisor c: would require values and data to be evaluated d: would require data but not values to be evaluated

d

a demand schedule is a table that shows the relationship between

price and quantity demanded

Almost all the economists agree that tariffs and import quotas

reduces general economic welfare

The most obvious benefit to specialization and trade is that they allow us to a: consume more goods than we otherwise would be able to consume b: work more hours per week than we otherwise would work c: consume more goods by forcing people in other countries to consume less goods d: spend more money on goods that are beneficial to society and less money on goods that are harmful to society

A

Tom Brady would probably not mow his lawn because a: his opportunity cost of mowing his lawn is higher than the cost of paying someone to mow it for him b: he has a comparative advantage in mowing his lawn relative to a landscaping service c: he has an absolute advantage in mowing his lawn relative to a landscaping service d: he might sprain his ankle

A

economists say that a market where goods are not consumed by those valuing the goods most highly is a: inefficient b: laissez fair c: efficient d: all of the above

A

in most societies resources are allocated by a: all the combined actions of millions of households and firms b: a single central planner c: those firms that use resources to provide goods and services d: a small number of central planners

A

Alexis is a lawyer. She bills her clients 100$ per hour for her services. She can also mow her lawn in 30 minutes. She can hire someone to mow her lawn who would take an hour. Of the following prices, which is the highest Alexis should pay someone to mow her lawn? a: 99 b: 49 c: 100 d: 50

B

a tax on buyers will shift the a: supply curve upward by the amount of tax b: demand curve downward by the amount of tax c: demand curve upward by the amount of tax d: supply curve downward by the amount of tax

B

analysis of data on workers and those looking for work is conducted by economists at the a: Office of Management and Budget b: Department of Labor c: Congressional Budget Office d: Department of the Treasury

B

belarus has a comparative advantage in the production of linen, but russia has an absolute advantage in the production of linen. if these two countries decide to trade, a: Russia should export linen to Belarus b: Belarus should export linen to russia c: trading linen would provide no net advantage to either country d: without additional information about opportunity costs, this question cannot be answered

B

Economists at the department of justice A: advise Congress on economic matters b: track the behavior of the nations money supply c: help enforce the nations antitrust laws d: prepare the federal budjet

C

When two countries trade with one another, it is most likely because a: some people involved in the trade do not understand that one of the two countries will be worse off because of the trade b: the opportunity costs of producing various goods are identical for the two countries c: the two countries wish to take advantage of the principle of comparative advantage d: the wealthy people in each country are able to benefit, through trade, by taking advantage of the people who are poor.

C

by definition, exports are a: people who work in foreign countries b: limits placed on the quantity of goods brought into a country c: goods produced domestically and sold abroad d: good in which a country has an absolute advantage

C

A survey of professional economists revealed that more than 3/4 of them agreed with 14 economic propositions. Which of the following is not agreed upon a: Local and state governments should eliminate subsidies to pro sports franchises b: the US should eliminate agricultural subsidies c: the US should not restrict employers from outsourcing work to foreign countries d: the US should withdraw from the North American Free Trade Agreement (NAFTA)

D

Resources are a: plentiful for households but scarce for economies b: scarce for households but plentiful for economies c: plentiful for households and plentiful for economies d: scarce for households and scarce for economies

D

When two variables move in opposite directions, the curve relating them is a: downward sloping and we say the variables are positively related b: upward sloping and we say the variables are negatively related c: upward sloping and we say the variables are positively related d: downward sloping and we say the variables are negatively related

D

Which of the following is a decision that economists study a: how much people work b: what people buy c: how much money people save d: all of the above

D

Which of the following products would be considered scarce a: bread b: baseballs autogrphed by babe ruth c: motorcycles d: all of the above

D

a decrease in the price of a good will a: decrease supply b: increase quantity supplied c: increase supply d: decrease quantity supplied

D

Shift of curve is

increase or decrease in supply/demand

movement on curve is

increase or decrease of quantity supplied/demanded

a tax burden falls more heavily on the side of the market that

is more inelastic

price floor

legal minimum on a price at which a good can be sold

Coal is considered to be a non renewable energy source. Which of the following statements is true a: coal is a scarce resource b: coal is not a resource c: coal is a non productive resource d: coal is an unlimited resource

a

Duties of the Council of Economic Advisors include a: advising the president and writing the annual Economic Report of the President b: implementing the president's tax policies c: tracking the behavior of the nations money supply d: all of the above are correct

a

For which of the following goods is the income elasticity of the demand likely highest a: boats b: hamburgers c: natural gas d: doctors visits

a

Producer surplus is the area a: below the price and above the supply curve b: between the supply and demand curves c: under the demand curve and above the price d: under the supply curve

a

The phenomenon of scarcity stems from the fact that a: resources are limited b: most economies production methods are not very good c: governments restrict production of too many goods and services d: in most economies, wealthy people consume disproportionate quantities of goods and services

a

a demand curve reflects each of the following except a: ability of buyers to obtain the quantity they desire b: willingness to pay of all buyers in the market c: highest price buyers are willing to pay for each quantity d: value each buyer in the market places on the good

a

a tax imposed on the sellers of a good will lower the a: effective price received by sellers and lower the equilibrium quantity b: price paid by buyers and raise the equilibrium quantity c: price paid by buyers and lower the equilibrium d: effective price received by sellers and raise equilibrium quantity

a

comparative advantage is related most closely to which of the following a: opportunity costs b: output per hour c: bargaining strength in international trade d: efficiency

a

for which pair of goods is the cross price elasticity most likely to be positive a: pens and pencils b: bicycle frames and bicycle tires c: college textbooks and ipods d: peanut butter and jelly

a

if a market is allowed to adjust freely to it's equilibrium price and quantity, then an increase in demand will a: increase producer surplus b: reduce producer surplus c: not affect producer surplus d: any of the above are possible

a

if a market is allowed to move freely to it's equilibrium price and quantity, then an increase in supply will a: increase consumer surplus b: reduce consumer surplus c: not affect consumer surplus d: any of the above are possible

a

price ceiling will be binding only if it is set a: below equilibrium price b: above equilibrium price c: equal to equilibrium price d: either above or belove E price

a

consumer surplus in a market can be represented by the

area below the demand curve and above the price

For which pairs of goods is the cross price elasticity most likely to be negative a: paperback novels b: peanut butter and jelly c: pens and pencils d: automobile tires and coffee

b

Inefficiency exists in an economy when a good is a: being produced with less than all available resources b: not being produced by the lowest cost producers c: not distributed fairly among buyers d: being consumed by buyers who value it most highly

b

Microeconomics is the study of a: how governemnt effects the economy b: how individual households and firms make decisions c: how money affects the economy d: how the economy works as a whole

b

a decrease in supply is represented by a: movement downward and to the left along a supply curve b: leftward shift of a supply curve c: rightward shift of supply curve d: movement upward and to the right along a supply curve

b

an improvement in production technology will shift the a: demand curve to the left b: supply curve to the right c: supply curve to the left d: demand curve to the right

b

an increase in price causes an increase in total revenue when demand is a: elastic b: inelastic c: unit elastic d: all of the above are possible

b

if a product is relatively inelastic, a discovery that increases production will a: raise price and total revenues b: lower price and total revenues c: raise price and lower total revenues d: lower price and raise total revenues

b

if the current allocation of resources in the market for wallpaper is efficient, then it must be the case that a: producer surplus = consumer surplus in the market for wallpaper b: the market for wallpaper is in equilibrium c: on the last unity of wallpaper that was produced and sold, the value to buyers exceeded the cost to sellers d: all of the above

b

in a market economy supply and demand determine

both the quantity of each good produced and the price at which it is sold

If a surplus exists in a market then we know that the actual price is a: below the equilibrium price and the quantity demanded is greater than quantity supplied b: below the equilibrium price, and quantity supplied is greater than quantity demanded c: above the equilibrium price and the quantity supplied is greater than quantity demanded d: above the equilibrium and quantity demanded is greater than quantity supplied

c

Leftward shift of a supply curve is called a: increase in quantity supplied b: increase in supply c: decrease in supply d: decrease in quantity supplied

c

The production possibilities frontier illustrates a: the combinations of output that an economy should produce b: the combinations of output that an economy should consume c: the combinations of output that an economy can produce d: all

c

buyers and sellers who have no influence on market price are referred to as a: price setters b: market pawns c: price takers d: monopolists

c

economics deals primarily with the concept of a: poverty b: money c: scarcity d: banking

c

Macroeconomics is the study of a: international trade b: markets for large products c: individual decision makers d: economy wide phenomena

d

a consumers willingness to pay directly measures a: the cost of a good to the buyer b: the extent to which advertising and other external forces have influenced the consumers preferences c: consumer surplus d: how much a buyer values a good

d

a minimum wage that is set below a markets equilibrium wage will a: result in excess demand for labor (unemployment) b: result in excess demand for labor (shortage of workers) c: result in excess supply of labor (unemployment) d: have no impact on employment

d

a shortage results when a: binding price ceiling is removed from a market b: nonbinding price ceiling is imposed on a market c: nonbinding price ceiling is removed by a market d: binding price ceiling is imposed on a market

d

binding minimum wage tends to a: cause labor surplus b: cause employment c: cause the greatest impact on the market for teenage labor d: all of the above

d

in considering how to allocate it's scarce resources among its various members, a household considers a: each members abilities b: each members efforts c: each members desires d: all of the above

d

If Miranda has an unlimited supply of oranges, is it a scarcity?

no

Equilibrium price must decrease when demand

decreases and supply does not change, when demand does not change and supply increases, and when demand and supply increase simultaneously

a tax imposed on the buyers of the good will raise the

price paid by the buyers and lower the equilibrium quantity

a tax imposed on the sellers of a good will raise the

price paid y buyers and lower the equilibrium quantity

Cross Price elasticity of demand measures how

the quantity demanded of one good changes in response to a change in the price of another good