Econ- Focused Quizzes Section 1

In market equilibrium...

participants have no incentive to alter their behavior and the market naturally gravitates toward this unique combination of price and quantity.

Quantity supplied refers to the amount of a good

produced by sellers

The x and y axes of a supply curve, respectively, show

quantity supplied and price

Suppose the equilibrium price of apples is $4. If the current price of apples is $5, we could MOST confidently conclude that

quantity supplied exceeds quantity demanded

If suppliers of gasoline expect prices to rise in the future, they are MOST likely to

reduce quantity supplied today

If the decline in the price of one good causes a decrease in quantity demanded of another good, these goods are considered

substitutes

The market equilibrium occurs where

supply and demand intersect

Which of the following pairs of goods are substitutes? a. pencils and notebooks b. tea and coffee c. automobile insurance and cars d. movies and popcorn e. peanut butter and jelly

tea and coffee

Scarcity implies...

that we have a limited amount of resources to satisfy our unlimited wants which requires trade-offs

What is the central topic of microeconomics?

the interaction of supply and demand

Suppliers will stop supplying a good when

the opportunity cost exceeds the price

Economics is MOST concerned with the tension between

wants and resources

Suppose the inverse demand function is represented by P = 45 - 5Q and the inverse supply function is represented by P = 5 + 3Q. What is the equilibrium price?

$20

How does the market for calculators change when the price of processor chips, an input, increases?

Quantity supplied decreases.

What is the law of supply?

Quantity supplied increases as price increases.

How does the market for cell phones change when a new technology makes production more efficient?

Quantity supplied increases.

What happens to the market for football tickets if their price increases?

Quantity supplied increases.

Who wrote the Wealth of Nations in 1776?

Adam Smith

How would a positive economist respond to a proposal to raise the minimum wage?

Positive economists identify cause-and-effect relationships to explain how different policies could affect different groups. Therefore, in response to a minimum wage hike proposal, a positive economist might note that higher wages may cause some minimum-wage employees to lose their jobs.

What is the law of demand?

Quantity demanded falls as a good's price rises.

Economic models could be described as

Simplistic

Which of the following scenarios would NOT cause the quantity supplied of cell phones to increase? a. The price of lithium batteries, an input, decreases. b. Apple, a major cell phone supplier, decides to close a production facility. c. LG, a cell phone supplier, expects prices to decrease in the future. d. Orange, a new cell phone supplier, enters the market. e. Microsoft, a cell phone supplier, discovers a new technology that increases productivity

Apple, a major cell phone supplier, decides to close a production facility.

What would a macroeconomist MOST likely study? a. price of gasoline b. gross domestic product c. income distribution d. municipal regulations e. world trade

B- A macroeconomist focuses on the overall performance of the national economy. Therefore, they would study changes in gross domestic product to gauge the economy's health.

Which of the following situations would a microeconomist study? a. Nike and Adidas competing for customers b. the performance of the S&P 500 c. the monthly readings of the Consumer Price Index d. changes in potential GDP e. the United States' trade deficit with China

Because Nike and Adidas competing for customers represents one particular market, the situation would be a subject of focus for a microeconomist.

Which of the following statements is NOT true at equilibrium? a. Quantity supplied equals quantity demanded. b. Suppliers can sell as much of the good as they would like at that price. c. Everyone wants the price to remain the same. d. Excess supply equals excess demand. e. Consumers can buy as much of the good as they would like at that price.

C. Everyone wants the price to remain the same.

What causes movement along the supply curve?

Changes in a good's own price causes movement along the supply curve.

Changes in all of the following factors cause the supply curve to shift

Changes in input prices, technology, expectations, and the number of sellers cause the supply curve to shift.

What changes can cause a demand curve to shift?

Changes in tastes, expectations, the income of buyers, and the prices of related goods can all cause the demand curve to shift.

What does rational mean?

Consumers select the action that produces the greatest benefit

Suppose Steve expects the price of gasoline to increase next month. What can we say about his demand curve today? a. It shifts downward. b. It shifts to the left. c. It shifts upward. d. It stays constant. e. It shifts to the right.

E. It shifts to the right.

Normative economics combines...

Economic analysis with value judgments

How do mutually beneficial trades arise?

From people possessing different abilities, interests, and resources, which gives rise to different opportunity costs.

Langston is experienced in catching fish, while Brandon bakes exceptional bread. They decide to specialize. Which economic concept does this situation involve?

Gains from trade

What is positive economics most concerned with?

Identifying cause-and-effect relationships.

How are microeconomics and macroeconomics similar?

In their assumptions about human behavior. However, because they focus on economic activity on different scales, they focus on different aspects of human behavior.

What is microeconomics most concerned with?

Individual behavior and the operation of specific markets

Of what nationality was Vilfredo Pareto?

Italian

What does economic analysis rely on?

Observation, description, and measurement of economic activity.

Gains from trade arise MOST directly from different...

Opportunity costs

Sophie can either babysit for $10, mow the lawn for $15, or drive her brother to soccer practice for $12. What is Sophie's opportunity cost if she chooses to mow the lawn?

Sophie's opportunity cost is the value of her next best alternative which is $12

What does Pareto Efficiency require?

That there is no way to improve at least one person's well-being without reducing another person's well-being.

The average supermarket contains how many different items?

The average supermarket contains 33,000 different items.

What must be true if two consumers voluntarily trade with each other?

The benefits outweigh the costs for both people.

How would a supplier MOST likely react in a situation where the current market price is above the equilibrium price?

The supplier would lower its price.

Benjamin received a free ticket to a baseball game. What is his opportunity cost for going to the game?

The time not spent doing something else

What is opportunity cost?

The value of the next best alternative. Individuals face opportunity costs due to trade-offs.

Jasmine went to a movie with her friends instead of taking a shift at work. Which economic concept does this situation involve?

Trade-offs

Which branch of economics can we use to determine which distribution of goods is best?

We use Normative Economics if we wanted to determine which distribution of goods is best.

Why should room and board not be considered part of the cost of college?

You need to eat and have someplace to live no matter what you are doing. Therefore, some type of room and board expense would be incurred regardless of whether you attend college or not.

A good is considered perfectly competitive if there are

a large number of buyers and sellers no single buyer or seller can influence the price the good is standardized and buyers are well informed about the market price

Suppose that at the current price of avocados of $2, quantity supplied is 9,000 and quantity demanded is 8,500. The equilibrium price of avocados is MOST likely a. $1.50 b. $3 c. $0.50 d. $2.50 e. $2

a. $1.50

Leticia, Jose, and Maya are sharing a pizza with 9 slices. Which of the following arrangements is NOT Pareto efficient? a. Jose eats 2 slices, while Leticia and Maya eat 3 slices each. b. Leticia eats all 9 slices. c. Leticia, Jose, and Maya each eat 3 slices. d. Maya eats 5 slices, while Jose and Leticia eat 2 slices each. e. Leticia eats 6 slices and Jose eats 3 slices.

a. Jose eats 2 slices, while Leticia and Maya eat 3 slices each. There was still a slice Jose could have eaten without taking away from Leticia or Maya

What type of relationship exists between quantity supplied and input prices?

negative

How do we obtain the market demand curve?

adding individual demand curves horizontally

How do we obtain the market supply curve?

adding individual supply curves horizontally In other words, for any given price, we find the total quantity supplied.

Suppose the equilibrium price of Oreos is $2.50. At which of the following prices would we MOST likely see excess demand? a. $2.50 b. $2 c. $4 d. $2.75 e. $3.50

b. $2

A market consists of all

buyers and sellers of a particular good

Which of the following issues BEST represents the concept of scarcity? a. Individuals must pay to do the things they like. b. Individuals choose to specialize in the things they do best. c. Individuals have twenty-four hours in a day. d. Individuals differ in their abilities and resources. e. Individuals can only perform one activity at any given time

c. Individuals have twenty-four hours in a day.

Which of the following questions would be BEST suited for a normative economist? a. "How much will unemployment increase if interest rates rise by 1%?" b. "What will happen to GDP if the dollar depreciates by 10%?" c. "How much will gasoline demand decrease if oil prices rise by $1?" d. "How much of a discount should movie theaters offer to students?" e. "How will raising the minimum wage affect small businesses?"

d. "How much of a discount should movie theaters offer to students?"

A university has $100,000 in scholarship funds. Which of the following situations is Pareto efficient? a. One student receives $40,000, another receives $30,000, and another receives $20,000. b. Four students receive $20,000. c. One student receives $40,000, and two students receive $25,000 each. d. One student receives $100,000. e. Ten students receive $5,000 each

d. One student receives $100,000.

If the price of Coke increases, it is MOST likely that the a. quantity demanded of Coke increases b. demand curve for juice shifts to the right c. quantity demanded of Pepsi decreases d. price of soda tumblers increases e. demand curve for Coke shifts to the left

demand curve for juice shifts to the right

The table that shows the quantity demanded at each price is called the

demand schedule

Suppose the current quantity supplied of grapes is 500. At what level of quantity demanded would sellers have an incentive to lower prices? a. 600 b. 1,000 c. 500 d. 550 e. 450

e. 450

Shortages are MOST associated with

excess demand

Which of the following factors affect BOTH quantity demanded and quantity supplied? a. expectations b. technology c. prices of related goods d. tastes e. input prices

expectations

Goods for which quantity demanded falls as income rises are called

inferior goods

To which economic concept is the law of demand MOST directly related?

opportunity cost As the price of a good rises, the opportunity cost of consuming that good increases as well