Econ 202 Ch 1-4
The price of textbooks and the price of all goods are 1positively related, and the relative price of textbooks 2increased between 2012 and 2017.
12
Economists typically explain economic observations with 1economic models. To build an economic model, economists will require 2assumptions. They will also use 3hypotheses to test the validity of the models.
123
Economics is the study of A how people make decisions in the face of scarcity. B how to increase the world's resources. C how to eliminate scarcity. D how people become rich.
A
Which of the following leads to a rightward shift of the demand curve? A An expectation of an increase in the good's price in the future BA decrease in the number of consumers C An increase in the good's own price DA decrease in the price of a substitute
A
An increase in supply.
A shift of supply curve to right.
Economic models A are complicated because human behavior is complicated. B are simplifications of the phenomena they attempt to explain. C are exactly the same as the phenomena they describe. D require either algebra or graphs.
B
Market equilibrium occurs when A the quantity demanded equals zero. B the quantity supplied equals the quantity demanded. C the quantity supplied is greater than the quantity demanded. Dthe quantity supplied equals zero.
B
According to the law of demand, consumers buy more of a good as A consumer income increases. B that good's price increases C consumer income decreases. D that good's price decreases.
D
All of the following cause a shift of the demand curve for a good EXCEPT A a change in consumer tastes. B a change in the price of a related good. C a change in consumer income. Da change in the price of that good.
D
A vertical demand curve is perfectly elastic.
False
Because there are few substitutes for a new drug, we expect the price elasticity of demand for that drug to be relatively elastic.
False
Demand is inelastic if the price elasticity of demand is greater than 1.
False
The price elasticity of demand measures how much price changes given a change in demand.
False
The price elasticity of supply is always negative.
False
An economy with little government control
Laissez Faire
A situation in which the government makes economic outcomes worse
Government failure
The government owns all capital and makes all economic decisions
Socialism
An economy with free exchange of goods and services
Market Economy
A situation that leads to inefficient economic outcome
Market Failure
Karl Marx argued that most economics will eventually become A a mixed economy. B a laissez faire system. C a market system. D socialism.
Socialism
A price floor is typically set above the equilibrium price.
True
Normal goods have positive income elasticities of demand, and inferior goods have negative income elasticities of demand.
True
The midpoint formula for calculating price elasticity of demand gives the same answer, regardless of the direction of the price change.
True
When demand shifts, supply elasticity affects the changes in equilibrium price and quantity.
True
A decrease in quantity supplied
a leftward movement along the supply curve
a market economy in which capital is owner by private individuals
capitalism
An economy in which decisions about what, how and for whom are highly centralized
command economy
The typical production possibility curve shows __________opportunity costs, meaning that if a nation produces more of one good, it will require giving up a(n) _________ amount of production of another good.
increasing, increasing
If the price elasticity of demand is 0.8, demand is said to be
inelastic
A product has elastic demand if, when price rises, total revenue falls.
true
If a market price is higher than the equilibrium price, a 1 surplus exists as the quantity demanded is 2 less than the quantity supplied, and there is a tendency for the market price to 3 fall
123
If we observe that gasoline prices rise after the government lowers the highway speed limit, then we can conclude that these two 1variables are 2negatively related, but we cannot conclude that 3causation exists between them.
123
The production possibilities curve shows that the opportunity cost of producing one more truck 1increases as more trucks are produced because the number of bicycles forgone 2increases as more trucks are produced. The shape of the production possibilities curve shows 3increasing opportunity costs.
123
Mobile phones and mobile apps are 1complements. All other things being equal, when the prices of mobile phones fall, the 2quantity demanded of mobile phones 3rises and the demand for mobile apps 4rises.
1234
A product with an elastic demand means that A consumers are relatively sensitive to a change in the price of the product. B consumers are relatively insensitive to a change in the quantity demanded. C producers are relatively insensitive to a change in the price of the product. D consumers are relatively insensitive to a change in the price of the product.
A
All else being equal, if supply decreases A the equilibrium price will rise and the equilibrium quantity will fall. B the equilibrium price will fall and the equilibrium quantity will rise. C both the equilibrium price and the equilibrium quantity will fall. D both the equilibrium price and the equilibrium quantity will rise.
A
Causation A means one event brings about another event. B means one event occurs subsequently to another event. C occurs when two variables are correlated. D means one event is observed to occur along with another.
A
For a given shift in demand, the more elastic is supply, the A smaller is the change in price. B greater is the change in price. C smaller is the shift in demand. D smaller is the change in equilibrium quantity.
A
If a firm lowers the price of a product when demand is elastic, then the firm should expect total revenue to A rise. B remain the same. C fall. D become zero.
A
If both supply and demand increase simultaneously, we will be certain that A the equilibrium quantity will increase. B the equilibrium price will decrease. C the equilibrium price will increase. Dthe equilibrium quantity will decrease.
A
In describing the relationship between the price of gasoline and the quantity of gasoline that consumers buy, the ceteris paribus assumption implies that A all other factors that may affect the price of gasoline and the quantity of gasoline purchased do not change. B the price of gasoline does not change. C the price of gasoline and the quantity of gasoline purchased do not change. D the quantity of gasoline that consumers buy does not change.
A
Steven has two hours to complete an assignment in economics or to watch a movie. For Steven, the opportunity cost of spending the two hours watching a movie A is a lower score in the economics assignment. B depends on how much he enjoys the movie. C is a higher score in the economics assignment. D is none because the economic assignment is not related to the movie.
A
The law of supply states that A price and quantity supplied are positively related. B the higher the price, the smaller the quantity that will be sold. C price and supply are positively related. D price and quantity supplied are inversely related.
A
The opportunity cost of a choice is the A value of the next best activity not chosen. B dollar amount paid to purchase what is chosen. C benefit associated with making that choice. D consequence associated with failure.
A
The term quantity demanded refers to A the amount of a good that people are willing to buy at a given price. B the point where the supply and demand curves cross. C a particular demand schedule. D the entire demand curve.
A
Which of the following is NOT held constant when constructing a supply curve for good A? A Price of good B Technology for producing good C Number of firms producing good A. D Price of inputs for producing good A
A
A price ceiling is A the equilibrium price. B the maximum allowable price set by government, and it causes a shortage if effective. C the maximum allowable price set by government, and it causes a surplus if effective. D the minimum allowable price set by government, and it causes a surplus if effective.
B
According to the law of supply, if the price of apples increases, all else being equal, A the supply of apples will decrease. B the quantity supplied of apples will increase. C the supply of apples will increase. D the quantity supplied of apples will decrease.
B
If a firm adopts a technology that can increase production without increasing labor or other resource inputs, then A there is movement along the production possibilities curve. B it will reach a point that is previously unattainable. C its production possibilities curve remains unchanged. D its production possibilities curve shifts inward.
B
In economics, the term supply refers to A the line that relates consumer spending to different output levels. B a set of price and quantity supplied combinations, all else being equal. C a particular quantity supplied at a specific price. D the amount that producers are willing but not able to produce at each price.
B
In what way do economic models differ from models in the physical sciences? A Economic models are usually more difficult than models in the physical sciences. B Economic models attempt to explain human behavior. C Economics has nothing to do with anything physical. D Economics relies on controlled experiments.
B
The opportunity cost of a choice is the A dollar amount paid to purchase what is chosen. B value of the next best activity not chosen. C benefit associated with making that choice. D consequence associated with failure.
B
The relative price of a smartwatch is A the actual price that a consumer pays for the smartwatch. B the price of the smartwatch compared with the average price of all goods and services.. C the actual price that the seller receives for the smartwatch. D the actual price of the smartwatch compared with its suggested retail price.
B
When economists say that the demand for a product has increased, they mean that A the price has decreased and consumers will buy more of the product. B consumers have bought more of that product at any given price. C the demand curve has shifted to the left. D consumers were willing to pay less for the product.
B
Which of the following would NOT cause the supply curve of smartphones to shift? A An improvement in the technology of producing smartphones B An increase in the price of smartphones C A decrease in the number of smartphone producers D An increase in the productivity of smartphone workers
B
A equally elastic in the long run as in the short run. B perfectly inelastic in the long run and perfectly elastic in the short run. C more elastic in the long run than in the short run. D less elastic in the long run than in the short run.
C
A surplus occurs when A there is no market adjustment because buyers can purchase what they want. B the quantity demanded exceeds the quantity supplied at the current price level. C the quantity supplied exceeds the quantity demanded at the current price level. D the quantity demanded equals the quantity supplied at the current price level.
C
Because coffee and cream are complements, their cross-price elasticity must be A greater than 1. B equal to 0. C less than 0. D positive.
C
Gains from trade occur as a result of A government intervention. B more equality among people. C economic interaction. D less scarcity.
C
If the price of apples increases, A the demand for apples will decrease. B the demand for apples will increase. C the quantity demanded of apples will decrease. D the quantity demanded of apples will increases.
C
If we observe that the prices of groceries in a city decrease after the city's population decreases, then we can conclude that A the population of a city causes grocery prices to go up. B grocery prices and the population of a city are negatively correlated. C grocery prices and the population of a city are positively correlated. D grocery prices cause the population of a city to go down.
C
In a market economy, the what, how, and for whom problems are determined by Apeople with political power Bno one. Cboth consumers and firms. Dthe government.
C
Microeconomics is concerned primarily with A the value of all goods and services in an economy. B how government improves a nation's overall living standard. C decision making of individual households. D the economic performance of smaller nations.
C
Scarcity is a situation in which A people face a shortage in a particular market. B people do not have enough money to pay for a good or service. C the available resources are not enough to satisfy the wants of the people. Dan item is very expensive.
C
The key elements of a market economy include all of the following except A property rights. B free exchanges of goods and services. C government support of market supply. D freely determined prices.
C
Ceteris paribus means A no other assumptions are being made. B all variables are independent. C all relationships are inverse. D other things being equal.
D
If a large storm in Florida destroyed a lot of orange crops, we would expect to see the equilibrium price of oranges A increase and the quantity of oranges sold to increase. B decrease and the quantity of oranges sold to increase. C decrease and the quantity of oranges sold to decrease. D increase and the quantity of oranges sold to decrease.
D
The demand curve for iPhones is A downward sloping because if the price of iPhones increases, people will buy more iPhones. B upward sloping because if the prices of other smartphones increase, people will buy fewer iPhones. C upward sloping because if the prices of other smartphones increase, people will buy more iPhones. D downward sloping because if the price of iPhones increases, people will buy fewer iPhones.
D
The key elements of a market economy include all of the following except A free exchanges of goods and services. B freely determined prices C property rights. D government support of market supply.
D
The minimum wage is an example of a A restriction on quantity. B price ceiling. C market equilibrium. D price floor.
D
Two variables are correlated if A an increase in one variable only causes another variable to increase. B they do not change most of the time. C there is no observable pattern in the changes of the two variables over time. D they both move up or down at about the same time.
D
Which of the following causes a rightward shift of the supply curve? A A government tax on production B A decrease in the number of producers C An increase in the price of the good being sold D A decrease in the cost of production
D
Label the points in the following graph of production possibilities for bicycles and trucks. 1Impossible 2Inefficient 3Efficient
Impossible- outside curve efficient- on line inefficient- inside the line
an increase in quantity supplied
a rightward movement along the supply curve
a decrease in supply
a shift of the supply curve to the left
A perfectly elastic demand curve has a price elasticity
of infinity
A market economy in which the government plays a role
mixed economy
