Economics practice exam

When economists refer to a market demand curve they mean that it represents

The horizontal summation of Individual demand curves

Which are positive statements 1. Main Street needs more coffee shops 2. A new parking garage on campus will reduce parking congestion 3. Last winter the state should have spent more money on snow removal

2 only

marginal analysis would put an emphasis on

Additional costs and benefits

If a store sells a good with a highly elastic demand then a decrease in the price would lead to

An increase in total revenue

Which concept would be addressed with microeconomics A the nation unemployment rate B the reasons for a decline in a country's total output C the price of college tuition that an individual student pays D inflation rate in brazil

C

A market economy is also known as a. economy and decisions are made by.

Capitalist: private individuals

Suppose the equilibrium price for a gallon of milk is 2.50 but due to government price supports the minimum legal price is 2.75 per gallon. This price floor:

Causes a surplus of milk in the market

Tax burdens are higher on consumers when

Demand is inelastic and supply is elastic

When market failure occurs it often creates an incentive for

Government intervention into the market

The more responsive buyers are to a change in price, the

Greater the price elasticity if demand

Willingness to pay is the

Highest value that a customer believes a good or service is worth

Which is not considered a basic economics question

How will the system accommodate change

A basic belief of economics is that

In general people respond to economic incentives

Suppose your income falls from 35000 to 33000 and that you quantity demanded of a good increases from 40 units to 55. The food is said to be

Inferior good

When quantity demanded in a market equals quantity supplied then the

Market is in equilibrium

Producer surplus is the difference between the

Market price and the minimum price the seller is willing to accept

Which of these is NOT a factor of production

Money

A country operating outside of production possibilities frontier is

Operating impossibly because a country cannot operate outside the production possibilities frontier

The price elasticity if demand measures the

Percentage change in quantity demanded divided by the percentage change in price

An effective price ceiling leads to

Quantity demanded exceeding quantity supplied

When an economy is operating efficiently the production of one more unit of a good will result in some loss of production of another good because

Resources are limited and efficiency implies that all resources are already in use

When quantity supplied exceeds quantity demanded a. occurs and prices are pushed. Toward equilibrium

Surplus: down

Which example represents incentives for decisions

Tax deductions for individual retirement accounts Investment tax credits for businesses Tax deductions for education savings accounts

A common definition of economics is

The allocation of scare resources to satisfy competing wants.

The basic idea of opportunity cost is that:

The decision to use resources in one activity means that the resources can not be used elsewhere

In a market based economy scarce resources are allocated by

The price system

At any price below the equilibrium price

The quantity demanded exceed the quantity supplied in the market

If a price ceiling is set above the equilibrium price in the market producer surplus will be

The same as it would be without the price ceiling

When markets are efficient

The sum of consumer and producer surplus is maximized

Tax incidents is defined as

Who bears the burden of a federal or local tax

Capital includes all of these EXCEPT

dollar bills in a bank vault