ECONOMICS CH: 1-4

Which of the following gives the definition of usury law?

A law that imposes an upper limit on the interest rate that lenders can charge.

Select all of the following descriptions that are true about market economies.

A market economy is based on private enterprise. A person's income is based on his or her ability to convert resources (especially labor) into something society values.

All of the following are accurate descriptions of traditional economies except:

A person's income is based on his or her ability to convert resources (especially labor) into something society values, so there is significant economic progress and development.

Which of the following factors will primarily affect the supply of bicycles? Note that rubber and aluminum are used to produce bicycles.

higher prices for rubber lower prices for aluminum

Which type of an economy, typically agricultural, can be described as where things are done in the same way as they have always been done?

traditional economy

Janet has a weekly budget of $14 to spend on coffee and train tickets. If cups of coffee cost $1.40 and train tickets cost $0.70, which of the following combinations represents Janet's budget constraint?

$14=Qcoffee×$1.40+Qtickets×$0.70

Anna has a fixed budget for entertainment for the year and likes movies and concerts. If Anna spends her entire budget on movies, she can go to 70 movies. If she spends her entire budget on concerts, she can go to 35 concerts. What is the opportunity cost of a concert?

2 movies

Suppose your marginal cost of making a peanut butter and jelly sandwich is constant at $10, but the marginal benefit of eating the sandwich decreases from $12 for one sandwich, to $10 for two sandwiches, to $8 for three sandwiches, to $6 for four sandwiches. How many sandwiches would you eat?

2 sandwiches

What is the opportunity cost of increasing the number of computers from 14 to 15?

5 Televisions

How does the concept of deadweight loss apply to a per unit tax?

A per unit tax results in a loss in social surplus.

Why is there consumer surplus?

Because some people are willing to pay more for a product than equilibrium price.

The graph below represents the market for corn. If a price floor is set at $8, which parts of the graph represent social surplus that is no longer received by the market participants? Select the two correct answers below.

C & E

The opportunity cost of producing one bushel of wheat in Canada is equal to 1/2 TV set. The opportunity cost of producing one bushel of wheat in the US is 2 TV sets. If these two countries specialize according to comparative advantage and then trade with each other, _____________________.

Canada will export wheat and import televisions

A hospital is built in a town that previously had no hospital. How is the demand for skilled labor impacted?

Demand for labor would increase.

_________ is where the amount of the product consumers want to buy is equal to the amount producers want to sell.

Equilibrium quantity

A surplus is the result of a price set above the equilibrium price. When producers face a surplus, they are willing to increase production even further. This combination of higher quantity and higher price increases industry profits, which are beneficial to producers.

False

In underground economies, governments are heavily involved in making decisions on the goods sold and the prices set.

False

Sunk costs change with the level of output.

False

The export/GDP ratio has generally declined worldwide in recent decades.

False

The principle of diminishing marginal utility states that people's total utility declines when increasing the number of units consumed.

False

True or false? If Deborah uses $21 each week to buy juice and lottery tickets and the cost of bottles of juice is $3 and the cost of lottery tickets is $1.50, Deborah's budget constraint can be written as $21=Ptickets×$3+Pjuice×$1.50 That's not right - let's review the answer. True False Answer Explanation Correct answer: False The budget constraint is calculated by Budget=P1×Q1+P2×Q2. With the given information we can see that we have enough information to fill in the prices and the budget in the equation. Deborah's correct budget constraint is: $21=Qjuice×$3+Qtickets×$1.50 Your answer:

False

Every day, Josephine buys coffee and lottery tickets. She has a budget of $12. The coffee at the bodega she goes to costs $0.75 and lottery tickets are $1.50 each. Graph Josephine's budget constraint by moving the endpoints of the line segment in the graph.

GRAPH (8,0) and (0,16) connect both of them.

What is the opportunity cost of owning a business? I. The economic profits that the business earns II. The accounting profits that the business earns III. The profits that could be earned in another business using the same amount of resources

III only - III. The profits that could be earned in another business using the same amount of resources

Which scenario is asking you to apply marginal analysis?

It costs $3 to go down the water slide. The first time you go down the slide, you are really excited, but your interest decreases each time you go down. How many times should you go down the water slide?

What is true of the product combination that satisfies allocative efficiency? Select the two correct answers below. Select all that apply: It is the combination of products that society most desires. It is one of many combinations of products that use all available resources. It is the combination of products that is most beneficial to the firms, but not buyers. It is a combination of products that is outside of the production possibilities frontier.

It is the combination of products that society most desires. It is one of many combinations of products that use all available resources.

Which of the following best defines consumer surplus?

It is the gap between the price consumers are willing to pay, based on their preferences, and the market equilibrium price.

According to this production possibilities frontier, why does P demonstrate productive efficiency?

It uses all of society's available resources.

In marginal analysis, when comparing costs and benefits, an optimal choice is found when ______. (Note: MB = marginal benefit, MC = marginal cost, TB = total benefit, and TC = total cost.)

MB ≥ MC

Which two explanations represent models in the study of economics?

Models simplify real world interactions for the purposes of illustration. Economic models are used to test theories.

According to this production possibilities frontier, which of the following statements are true about point Q?

Point Q is not considered to demonstrate productive efficiency.

People gain confidence that the economy is growing and that their jobs are secure. How does this impact the demand for financial capital?

The demand for financial capital increases.

Suppose that baby boomers become increasingly concerned about whether or not the government will really have the funds to make Social Security payments to them over their retirement years. How does this concern impact the demand for financial capital in the present?

The demand for financial capital will decrease.

When it comes to watching movies, consumers have moved away from DVDs and into streaming. What has happened to the demand for DVD players over this time?

The demand has decreased.

Positive statements can be true or false.

True

The law of supply states that when there are many sellers of a good, an increase in price results in an increase in quantity supplied.

True

True or false?When the economy produces at an inefficient quantity due to a price ceiling or price floor, there will be a deadweight loss.

True

Consumer surplus is the area found _____________ market price and _______________ the demand curve.

above; below

Which of the following factors would shift the demand curve? Select the correct answer below: *an expectation of a boom in housing prices *a news announcement of new health benefits discovered for a vegetable *a rise in income due to a booming economy *all of the above

all of the above

Suppose that a price floor is set in the market for oranges, raising the price from $1.05 per pound to $1.10 per pound of oranges. The sum of which two areas represents the lost social surplus (deadweight loss) from this price floor? Please use the variables from the image in your answer (and not numeric calculations).

deadweight loss = S + U

Positive statements ___________________.

define the world as it is

When considering factors that shift supply curves, which of the following will increase supply?

favorable natural conditions for production lower taxes levied on producers

The table below shows the amount of savings and borrowing in a market for car loans, measured in millions of dollars, at various interest rates. An increase in the demand for car loans results in a $15 million increase in quantity demanded at each interest rate. What is the new equilibrium interest rate and equilibrium quantity in the market for car loans? Hint: Begin by increasing each level of quantity demanded by $15 million.

i = 3%, Q = $215 million

When John first starts his job, he rides the bus wherever he goes. However, after one year, John receives a promotion and a pay raise, leading to an increase in his annual income. As a result of his pay raise, John decides to drive wherever he goes instead of riding the bus. This behavior would indicate that to John, a bus ride is a(n) _________ good.

inferior

The supply and demand schedule below represents the market for toothbrushes. What is the equilibrium price and quantity? Price QuantitySupplied QuantityDemanded $0 0 56, $2 6 48, $4 12 40, $6 18 32, $8 24 24, $10 30 16, $12 36 8, $14 42 0

q=24, p=$8

Quantity demanded is different from demand because _________________________.

quantity demanded is the number of units consumers demand at a specific price, while demand is a schedule comprised of quantity demanded at different prices

The demand and supply schedules in this table list the quantity supplied and quantity demanded of cashiers at different salaries. Demand and Supply of Cashiers AnnualSalary QuantityDemanded QuantitySupplied $10,000 20,000 10,000 $15,000 15,000 15,000 $20,000 10,000 20,000 $25,000 5,000 25,000 $30,000 0 30,000

red - x, y (10,000, 10,000) , (15,000, 15, 000) , (20,000, 20,000) , (25,000, 25, 000) blue - x, y (20,000, 10,000) ,(15,000, 15,000) ,(10,000, 20,000) ,(5,000, 25,000)

What term is best described as the situation where the quantity demanded exceeds the quantity supplied?

shortage

What is the best definition of producer surplus?

the difference in the amount the producer is paid and the cost of production

Which description best fits the definition of opportunity cost?

the measure of cost by what is given up in exchange for what is obtained

Market equilibrium is defined as ___________________.

the point where the supply curve and demand curve cross

When plotting a demand curve for crushed tomatoes, what is assumed to be constant according to ceteris paribus?

the price of a can of tomato sauce income

Suppose Julia has a budget of $40 that she spends on movies (Q1) and rollerskating (Q2). The price of movie tickets recently increased from $7 per person to $10 per person and the price of roller skating decreased from $5 to $4 per person. What is Julia's new budget constraint?

$40 = $10 × Q1 + $4 × Q2

Chucky is on a tight budget. He has only $9.60 each week allotted for juice and train tickets. The juice at the train station is $1.60 and the cost of train tickets is $0.80 if he buys them in advance. What is Chucky's budget constraint?

$9.60 = Qjuice × $1.60 + Qtickets × $0.80

Chucky is on a tight budget. He has only $9.60 each week allotted for juice and train tickets. A bottle of juice costs $1.60 and the cost of a train ticket is $0.80. Graph Chucky's budget constraint by moving the endpoints of the line segment in the graph.

(0,12) & (6,0)

Beatrice buys potato chips and soda each week with a total budget of $25. Sometimes she buys more potato chips, sometimes she buys more soda. The cost of potato chips is $1 per bag and the cost of a soda is $1.25 per bottle. Graph Beatrice's budget constraint by moving the endpoints of the line segment in the graph.

(0,25) & (20,0)

Carissa has $15 to spend on folders and notebooks. Folders cost $1.25 each. Notebooks cost $2.50 each. Graph Carissa's budget constraint by moving the endpoints of the line segment in the graph.

(0,6) & (12,0)

If a family spends its entire budget in a given time frame, the family can afford either 1 hospital stay or 10 visits to the doctor. Assuming the family spends its entire budget on just these two services, what is the opportunity cost of one visit to the doctor in the time frame?

0.1 hospital stays.

If a family spends its entire budget in a given time frame, the family can afford either 56 servings of vegetables or 15 servings of meat. Assuming the family spends its entire budget on just these two items, what is the opportunity cost of one serving of vegetables in the time frame? (Round your answer to two decimal places.)

0.27 serving of meat.

If a family spends its entire budget in a given time frame, the family can afford either 15 movie nights or 8 restaurant meals. Assuming the family spends its entire budget on just these two goods, what is the opportunity cost of one movie night? (Round your answer to two decimal places.)

0.53 restaurant meals.

If a family spends its entire budget in a given time frame, the family can afford either 90 cans of soup or 60 frozen dinners. Assuming the family spends its entire budget on just these two goods, what is the opportunity cost of one extra can of soup in the time frame?

0.7 frozen dinners

Mike has a $10 budget that he can spend on either hot dogs or hamburgers. Hot dogs cost $1 each. Hamburgers cost $2 each. If Mike only has $10 to spend, reposition the endpoints of the line segment on the graph to demonstrate his budget constraint in terms of quantities of hamburgers and hotdogs. Note: Each endpoint has a pull handle.

10 hot dogs (10,0) 5 hamburgers (0,5)

The following is the supply schedule for shrimp. If the price increases by $0.20 from $3.40 to $3.60, there is a 50 unit increase in the quantity supplied. If the price increases by $0.20 from $3.80 to $4.00, what is the resulting increase in quantity supplied?

10 units

Consider the supply curve shown for Company R in the figure. The marketing director of Company R has hired you to analyze the effects of an expected increase in price. The market price is currently $10.00. If the market price increases by 10%, what quantity supplied is the producer willing to bring to the market?

1150

If a family spends its entire budget in a given time frame, the family can afford either 14 outings or 24 household items. Assuming the family spends its entire budget on just these two things, what is the opportunity cost of one extra outing in the time frame? (Round your answer to two decimal places.)

2

Suppose your current budget amount can buy either 6 watches or 3 ties. What is the opportunity cost of purchasing a tie? Acceptable answers include whole numbers or fractions.

2

If a family spends its entire budget in a given time frame, the family can afford either 190 bus rides or 45 taxi rides. Assuming the family spends its entire budget on just these two things, what is the opportunity cost of one extra taxi ride in the time frame? (Round your answer to two decimal places.)

4.22 bus rides.

The table below shows the amount of savings and borrowing in a market for student loans, measured in millions of dollars, at various interest rates. Imagine that there is an increase in the number of students going to college, which increases the quantity demanded of student loans by $60 million at each interest rate. What is the new equilibrium interest rate in the financial market for student loans? Hint: Begin by increasing each level of quantity demanded by $60 million.

5.1%

Jenny wants to spend her money earned waitressing ($300 a month) on bowling (Q1) and breakfast (Q2). Bowling costs $3 a game and her favorite breakfast is $15 a meal. Using Jenny's budget constraint, if she purchases 6 breakfasts, how many games of bowling can she purchase?

70 Games

The graph below represents the market for pizzas. A supply and a demand curve are shown with a price floor at $29. Equilibrium price is $14 and the equilibrium quantity is 790 pizzas. The quantity demanded at the price floor is 450 pizzas and the quantity supplied is 1,200 pizzas. Calculate the surplus caused by the price floor.

750 pizzas

Of the following examples below, which is not an example of scarcity?

A puppy mill was shut down and all of the dogs went to an overcapacity humane society, leading to an increase in the supply of adoptable dogs.

In command economies, decision-making is decentralized.

False

True or false? When considering factors that shift supply curves, lower product taxes on producers will decrease supply.

False

When making a decision, rational people thinking at the margin will consider sunk costs.

False

In a circular flow diagram, who pays wages?

Firms

Suppose the market for credit cards is currently in equilibrium. What will be the consequence if the government sets a limit on credit card interest rates that is above the market equilibrium?

Nothing

The following budget constraint applies to a budget of $18. Given a budget of $18, which of the following combinations of bottles of water and apples are not affordable?

Point G: 7 waters and 12 apples

Suppose there is a soda tax levied on producers to curb obesity. What should a reduction in the soda tax do to the supply of sodas?

Producers are likely to supply more sodas.

Jim and Norma go wine and oyster tasting. They set a budget of $100 for the day. Wine tastings (P1) are $10 per flight and oysters on the half shell (P2) are $2 each. According to their budget constraint, how many oysters are they able to purchase if they order 2 flights total?

Q2 = 40 oysters

Given the demand schedule below, if the price increases from $1.40 to $2.00, what do we expect to happen to quantity demanded? Price(per gallon) QuantityDemanded(millions of gallons) $1.00 800, $1.20 700, $1.40 600, $1.60 550, $1.80 500, $2.00 460, $2.20 420

Quantity demanded will decrease by 140 units.

You are responsible for setting prices of finished clothing items at a major textile manufacturer. In the past year the price of cotton, a critical input, has increased by 20%. What is the likely result?

Supply of clothing will decrease.

What is true of a budget constraint?

The budget constraint is a straight line.

Corn farmers in Ohio experience especially good weather, extending the growing season. Which of the following describes the impact on corn supply?

The corn supply will increase.

All other things unchanged, what happens to the demand curve for organic pasta if there is a decrease in family income? For this example, consider organic pasta a normal good.

The demand curve will shift to the left.

The local school district introduces a policy where all teachers must have access to a coach or mentor in their subject areas. How does this impact the demand for academic coaches?

The demand for academic coaches increases.

For generations, the Irish were among the poorest in the British Isles and relied almost exclusively on simple potatoes, which were inexpensive but not particularly tasty, for sustenance. Potatoes were an inferior food product favored by the poorer sections of the population. All else being equal, how would you expect the demand for potatoes per person to change after several decades of significant economic development?

The demand for potatoes is likely to decline.

A widespread power outage occurs at Kevin & Sons Cinemas at the same time a summer blockbuster movie is released. How will the equilibrium price and quantity of movie tickets be affected?

The equilibrium price of movie tickets rises.

________ is the concept that suggests the remarkable possibility that broader social good can emerge from selfish individual action

The invisible hand metaphor

Suppose the interest rates for mutual funds market were to decrease by a significant amount. Ceteris paribus, how would you expect the supply curve for certificate of deposit accounts (a substitute good) to change in response to this?

The supply curve will shift to the right.

As individuals retire, what happens to the supply of financial capital?

The supply decreases.

Many American car manufacturers are located in the Southeast. Due to hurricane season, the Southeast has gotten a significant amount of rain, causing vast flooding. How is the supply of cars impacted?

The supply of cars decreases.

A significant portion of the world's oranges are produced in Florida. What would likely happen if a hurricane wiped out a significant portion of Florida's orange crop? Please select two correct answers.

The supply of oranges would decrease. The quantity supplied of oranges would decrease at every price.

Identify one key takeaway from the Circular Flow Diagram.

There are no free exchanges between firms and households.

True or false? If price is set at $1.20, the market will experience upward pressure on the price.

True

Choose the answer that best defines a substitute good.

a good or service that a consumer sees as the same or similar and can be used in place of another good or service

If a product's demand rises as income rises, ceteris paribus, the product is ________.

a normal good

Which of the following would be consequences of more rental properties in the United States being subject to binding price ceilings?

a shortage of apartments the quantity demanded of apartments will exceed the quantity supplied

As additional increments of marginal resources are added to either healthcare or education, the marginal benefit from those additional increments will decline. What do economists call this pattern?

law of diminishing returns

The below figure illustrates the market for bread. If the government placed a price ceiling on bread at $20, what would be the deadweight loss (or the loss in social surplus) in the market? Note that a price ceiling keeps a price from rising above a certain level (the "ceiling").

lost social surplus = $0

The graph below represents the market for bottled water with a price ceiling at $3 per gallon. The sum of which two areas represents the lost social surplus (deadweight loss) from this price ceiling? Please use the variables from the image in your answer (and not numeric calculations).

lost social surplus = B + D

Suppose that due to surprisingly favorable weather in one part of the country, the supply of wheat this year is much greater than expected. Farmer Jane, a wheat farmer in a different part of the country who based her decision of how much to plant in part on an expected price that didn't account for this increase in supply, is not too worried because there is a price floor for her product set at $5 per bushel. At this price her costs will be covered. Although Farmer Jane will benefit from this price floor, society as a whole will not due to social surplus loss. The sum of which two areas represents the lost social surplus (deadweight loss) from this price floor? Please use the areas from the image (K,L,M,N,O,P) in your answer (and not numeric calculations).

lost social surplus = M + O

The purpose of a theory, in general, is to ________________________________.

take a complex, real-world issue and simplify it down to its essentials