economics test 1-mikayla
how does a budget constraint look graphically
a straight line
A decrease in the price of either one or the other good will cause a consumer's budget constraint to: 1. pivot rightward (pivot out). 2. shift leftward. 3. shift rightward. 4. pivot leftward (pivot in).
1
A model refers to: 1. a simplified description, or representation, of reality. 2. a perfect replica of reality. 3. a set of facts established by observation and measurement. 4. facts, measurements, or statistics that describe the world.
1
Causation occurs when: 1. change in one variable is the reason for the change in another variable. 2. change in one variable does not cause any change in another variable. 3. two variables tend to move in opposite directions. 4. two variables tend to move in the same direction.
1
Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and therefore choose to invest in foreign markets. By using all available information as they act to achieve their goals, these investors are exemplifying the economic idea that 1. people are rational. 2. people respond to economic incentives. 3. optimal decisions are made at the margin. 4. equity is more important than efficiency.
1
The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00. Although her money income had not changed, Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant. Toni's actions are explained by which of the following? 1. income and substitution effects 2. income effect only or substitution effect only but not both effects 3. price effect 4. consumption effect
1
Which of the following best describes the difference between a demand curve and a demand schedule? 1. A demand curve is a graphical representation of the relationship between the quantity of a good and its price, whereas a demand schedule is a tabular representation. 2. A demand curve shows different quantities of a good demanded at different incomes, whereas a demand schedule shows different quantities of a good demanded at different prices. 3. A demand curve shows different quantities of a good demanded at different prices, whereas a demand schedule shows different quantities of a good demanded at different incomes. 4. A demand curve can be derived from a demand schedule, but a demand schedule cannot be derived from a demand curve.
1
Which of the following describes the substitution effect of a price change? 1. The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. 2. The change in quantity demanded of a good that results from the change in the price of a substitute for the good. 3. The change in quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant. 4. None of the above.
1
economics studies
1. Scarcity. 2. The social institutions used to address scarcity. 3. What to produce, how to produce it, and who gets it.
three fundamental questions
1. what to produce 2. how to produce it 3. who gets it
Which of the following can be established using economic analysis:
1.People should work on teams to produce things because there is more job satisfaction. 2.Products should be made more reliably. 3.The government should not be the entity to choose the amounts of all available goods and services in the economy.
An item has utility for a consumer if it 1. is something everyone else wants. 2. generates enjoyment or satisfaction. 3. is scarce. 4. has a high price.
2
Central control of economies 1.Emerged with governments. 2.Regulated resources like land and water. 3.Was first proposed by Greek philosopher Leonidas. 4.Was absent when society consisted of just prehistoric clans. 5.None of the above.
2
Marginal utility is the 1. average satisfaction received from consuming a product. 2. extra satisfaction received from consuming one more unit of a product. 3. satisfaction achieved when a consumer has had enough of a product. 4. total satisfaction received from consuming a given number of units of a product.
2
Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles. These consumers who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that 1. people are rational. 2. people respond to economic incentives. 3. optimal decisions are made at the margin. 4. equity is more important than efficiency.
2
The demand schedule for a commodity illustrates how the consumption of a commodity changes with changes in: 1. tastes and preferences. 2. its price. 3. income. 4. supply.
2
The revenue received from the sale of ________ of a product is a marginal benefit to the firm. 1. no units 2. an additional unit 3. the total number of units 4. only profitable units
2
Making optimal decisions "at the margin" requires 1. making decisions according to one's whims and fancies. 2. making borderline decisions. 3. weighing the costs and benefits of a decision before 4. deciding if it should be pursued. 5. making consistently irrational decisions.
3
The extra cost associated with undertaking an activity is called 1. opportunity cost. 2. net loss 3. marginal cost. 4. foregone cost.
3
The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as 1. economizing behavior. 2. maximizing behavior. 3. the budget constraint. 4. the price constraint.
3
The substitution effect of an increase in the price of peaches is 1. the change in the supply for peaches that results when the price of peaches increases. 2. the change in the quantity of peaches demanded that results from the effect of the change in the price of peaches on the consumer's purchasing power. 3. the change in the quantity demanded that results from a change in the price of peaches, making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. 4. None of the Above.
3
A change in the slope of a budget constraint indicates 1. a change in the price of either good without a change in the opportunity cost. 2. a change in the consumer's income. 3. a change in the consumer's tastes and preferences. 4. a change in the price of either good that causes a change in the opportunity cost.
4
A correlation between two variables implies that: 1. when one variable changes, the other variable always changes by exactly the same amount. 2. there is a cause-effect relationship between the two variables. 3. it is impossible to measure one variable without measuring the other. 4. there is a mutual relationship between both the variables.
4
Adam Smith's book, the Wealth of Nations, investigated 1. The factors affecting economic wealth across countries. 2. The role of wealth played in social well-being. 3. The role of custom in the economy. 4. The role of markets in determining economic efficiency. 5. All of the above.
4
Advantages of trade include that 1. It permits specialization. 2. It can improve economic performance. 3. It generally benefits both parties. 4. All of the above.
4
Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases: 1. There is no change in the opportunity cost of consuming either good. 2. the opportunity cost of buying sweaters decreases. 3. the opportunity cost of buying shirts increases. 4. the opportunity cost of buying sweaters increases.
4
If quantity of milk is measured on the horizontal axis and quantity of juice is measured on the vertical axis, a decrease in the price of milk will cause the budget constraint to: 1. pivot rightward (pivot out) along the vertical axis. 2. shift to the left. 3. shift to the right. 4. pivot rightward (pivot out) along the horizontal axis
4
If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint: 1. shifts to the left. 2. pivots rightward (pivot out) without a change in the intercept on the horizontal axis. 3. shifts to the right. 4. pivots leftward (pivot in) without a change in the intercept on the horizontal axis.
4
The key advantage of market exchange compared to one-on-one (barter) trade is that 1. Markets allow for greater specialization. 2. Markets allow trading to occur to a larger extent. 3. Markets are more efficient. 4. All of the above.
4
The quantity demanded of a good is: 1. always determined by government intervention. 2. determined independent of the market price. 3. the amount of a good that sellers are willing to supply at a given market price. 4. the amount of a good that buyers are willing to purchase at a given market price.
4
which of the following is not an economic question 1. How many iPhones and Droids should we produce? 2. Should we urbanize farmland? 3. How much BlueBell should be made? 4. Would people be better off if they wanted fewer goods? 5. Should we teach courses online?
4
Which of the following methods have been used to govern economic activity? 1. Customs. 2. Apprenticeships. 3. Markets. 4. Central control. 5. All of the above have been used to govern economic activities.
5
A consumer has $100 to spend on tables and chairs. If his income increases to $200, the prices of the goods remaining unchanged, his budget constraint: A. shifts outward. B. pivots outward along the horizontal axis. C. pivots inward along the vertical axis. D. shifts inward.
A
A production possibilities frontier: A. shows the maximum attainable combinations of two goods that may be produced with available resources. B. shows the market for a good or service. C. shows how participants in the market are linked. D. shows how unlimited wants exceed the limited resources available to fulfill those wants. E. shows the act of buying and selling.
A
Lawrence Summers served as secretary of the treasury in the Clinton administration and as director of National Economic Council in the Obama administration. He has been quoted as giving the following moral defense of the economic approach. "There is nothing morally unattractive about saying: We need to analyze which way of spending money on health care will produce more benefit and which less, and using our money as efficiently as we can. I don't think there is anything immoral about seeking to achieve environmental benefits at the lowest possible costs." Source: David Wessel, "Precepts from Professor Summers," Wall Street Journal, October 17, 2002. It would be more moral to reduce pollution, A. taking the cost into account because money spent on pollution reduction is not available for other worthy activities. B. taking the cost into account because reducing pollution often reduces economic growth. C. not taking the cost into account because pollution reduction is typically associated with large benefits. D. taking the cost into account because the total cost of reducing pollution is likely enormous. E. not taking the cost into account because pollution is potentially harmful to our health.
A
Manager 1: "The only way we can increase the revenue LOADING... we receive from selling our graphing calculatorsgraphing calculators is by cutting the price." Manager 2: "Cutting the price of a product never increases the amount of revenue you receive. If we want to increase revenue, we have to increase price." Do you agree with the reasoning of Manager 2? A. I disagree. Cutting the price will increase the revenue if the demand is price elastic. B. I agree. Cutting the price will not increase the amount of revenue, you have to increase price. C. I agree. Cutting the price will never increase the amount of revenue you receive. D. I disagree. Cutting the price will increase the revenue only if the demand is inelastic.
A
Over the past 30 years, the price of oil has been relatively unstable, fluctuating between $11.00 and well over $100 per barrel. Which of the following potentially contributes to oil-price instability? Oil prices are relatively unstable because A. the supply of oil is inelastic. .B. the market for oil is relatively competitive. C. the income elasticity of demand for oil is negative. D. the demand for oil is elastic. E. OPEC has been successful in controlling the quantity of oil its members supply.
A
The demand curve for corn is downward sloping. If the price of corn, an inferior good, falls, A. the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded. B. the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases, resulting in a net increase in quantity demanded. C. both the income and substitution effects reinforce each other to increase the quantity demanded. D. the income and substitution effects offset each other but the price effect of an inferior good leads you to buy less corn.
A
The income effect of a decrease in the price of macaroni and cheese (assume this is an inferior good) results in A. a decrease in the quantity of macaroni and cheese demanded. .B. an increase in the quantity of macaroni and cheese demanded. C. a decrease in the demand for macaroni and cheese. D. an increase in the demand for macaroni and cheese.
A
The wrist watch industry in a country is not very competitive. There are limited brands available and the existing firms use their market power to keep prices high. Envy, one of the leading brands in the market, is planning to increase the price from $1,000 to $1,100 per watch. The firm is expecting the quantity demanded to fall by only 7 percent. However, after the price is increased to $1,100, quantity demanded actually declined by 12 percent. Sonia, a student of economics, knows that the average income level in this country has increased over the last year. When actual sales of Envy watches turn out to be lower than anticipated, she concludes that the income elasticity of demand for Envy watches is negative. Her conclusion is flawed because A. she is confusing between price elasticity of demand and income elasticity of demand. B. she is confusing between consumer and producer surplus. C. she is ignoring the fact that the cost of production of Envy watches could be high. D. she is assuming that the government of this country does not import watches. E. she is assuming that rival firms have reduced the price of their watches.
A
Which of the following illustrates the law of supply? A. An increase in price causes an increase in the quantity supplied, and a decrease in price causes a decrease in the quantity supplied. B. A change in price causes a shift of the supply curve. C. An increase in the number of firms in an industry causes a shift of the supply curve. D. All of the above illustrate the law of supply.
A
[Related to the Making the Connection] An article in the Wall Street Journal notes that although U.S. oil production has increased rapidly in recent years, the increase has still amounted to only 5 percent of world production. Still, that increase has been "enough to help trigger a price collapse." Source: Georgi Kantchev and Bill Spindle, "Shale-Oil Producers Ready to Raise Output," Wall Street Journal, May 13, 2015. A small increase in supply can lead to a large decline in equilibrium price when A. demand is relatively inelastic. B. supply is perfectly elastic. C. demand is perfectly elastic. D. demand is relatively elastic.
A
According to a news story about the International Energy Agency, the agency forecast that "the current slide in [oil] prices won't [reduce] global supply." Source: Sarah Kent, "Plunging Oil Prices Won't Dent Supply in Short Term," Wall Street Journal, December 12, 2014. Would a decline in oil prices ever cause a reduction in the supply of oil? A. Yes, a decline in oil prices would reduce both the quantity of oil supplied and the supply of oil. B. No, a decline in oil prices would reduce the quantity of oil supplied, not the supply of oil. C. No, the supply of oil is fixed. D. Yes, a decline in oil prices would reduce the supply of oil, but not the quantity of oil supplied.
B
Assume that a consumer can spend $20 on two goods: pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumer's budget constraint? A. 2 pens and 3 pencils B. 2 pens and 5 pencils C. 3 pens and 2 pencils D. 1 pen and 10 pencils
B
Choco Fantasy is a firm that produces both dark chocolates as well as liquor chocolates. It can produce 10,000 bars of dark chocolate per month if all its resources are used to produce only this variety. Similarly, using all its resources in the production of liquor chocolates, the firm can produce 8,000 bars per month. However, during a given month, the firm produces both varieties. Which of the following, if true, would suggest that the firm is operating on its PPF? A. In an attempt to cut costs, the company is planning to fire its unproductive resources. B. Even though the demand for both liquor and dark chocolates has increased, the company can increase the production of only one variety. C. Medical reports earlier this year indicated that higher chocolate consumption increases the risk of heart attack. D. The opportunity cost of shifting resources from the production of liquor chocolates to dark chocolates is marginal. E. Most domestic consumers prefer the better quality Swiss chocolates imported by the country.
B
Consider firms selling three goodslong dash—one firm sells a good with an income elasticity of demand less than zero, one firm sells a good with an income elasticity of demand greater than zero but less than one, and one firm sells a good with an income elasticity of demand greater than one. In a recession, sales of a good with A. an income elasticity of demand less than zero will decline the most and sales of a good with an income elasticity of demand greater than one will increase the most. B. an income elasticity of demand greater than one will decline the most and sales of a good with an income elasticity of demand less than zero will increase the most. C. an income elasticity of demand less than zero will decline along with the sales of a good with an income elasticity of demand greater than zero but less than one. D. an income elasticity of demand less than zero will increase along with the sales of a good with an income elasticity of demand greater than one.
B
Like many other cities, Denver experienced a sharp decline in construction of new houses in the years following 2006. Many carpenters, roofers, and other skilled workers left the area or found jobs in other industries. In addition, builders stopped buying and preparing home lots for construction. According to an article in the Wall Street Journal, by 2014, as consumers increased their demand for new homes in Denver, "New-home prices have surged over the past two years ... amid a shortage of home lots and skilled construction workers." Source: Kris Hudson, "Labor Shortage Besets Home Builders," Wall Street Journal, May 1, 2014. In the future, the price increases of new houses in Denver can be expected to be A. smaller because supply is less elastic over time. B. smaller because supply is more elastic over time. .C. larger because supply is more elastic over time. D. larger because supply is less elastic over time.
B
The price elasticity of demand in the United States for crude oil has been estimated to be minus−0.061 in the short run and minus−0.453 in the long run. Source: John C. B. Cooper, "Price Elasticity of Demand for Crude Oil: Estimate for 23 Countries," OPEC Review, March, 2003, pp. 1-8. The demand for crude oil A. is more price inelastic in the long run than in the short run because in the short run a substitute for crude oil may be found. B. is more price elastic in the long run than in the short run because in the long run a substitute for crude oil may be found. C. is equally price inelastic in both the short and long run as there are not many substitutes for crude oil. D. is price elastic in both the short and long run as there exists many substitutes for crude oil.
B
The cross-price elasticity of demand is A. the percentage change in quantity supplied divided by the percentage change in price. B. the percentage change in quantity demanded of one good divided by the percentage change in the price of another good. C. the percentage change in quantity demanded of one good divided by the percentage change in the quantity of another good. D. the percentage change in quantity demanded divided by the percentage change in price. E. the percentage change in quantity demanded divided by the percentage change in income.
B
What does increasing marginal opportunity costs mean? A. Production is not occurring on the production possibilities frontier. B. Increasing the production of a good requires larger and larger decreases in the production of another good. C. Increasing the production of a good requires decreases in the production of another good. D. The economy is unable to produce increasing quantities of goods and services. E. Increasing the production of a good requires smaller and smaller decreases in the production of another good.
B
A production possibilities frontier (PPF) is A. a curve that shows the potential productive capabilities of the frontier (defined as the area outside of cities) of a developing economy. B. a curve showing the generally attainable combinations of two products that may be produced with all planned or potential, yet undeveloped technology. C. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology. D. a curve that illustrates the demand of two goods for the average consumer.
C
We can show economic efficiency: A. with points inside and on the production possibilities frontier. B. with points inside the production possibilities frontier. C. with points on the production possibilities frontier. D. with points outside the production possibilities frontier. E. with points on and outside the production possibilities frontier.
C
What are the implications of this idea for the shape of the production possibilities frontier? A. The production possibilities frontier will have a positive slope. B. The production possibilities frontier will have a negative slope. C. The production possibilities frontier will be bowed outward. D. The production possibilities frontier will be bowed inward. E. The production possibilities frontier will be a straight line.
C
A sportswriter writing about the Cleveland Indians baseball team made the following observation: "If the Indians suddenly slashed all tickets to $10, would their attendance actually increase? Not all that much and revenue would drop dramatically." Source: David Schoenfiel, "Chat with David Schoenfield," espn.com, November 27, 2012. The sportswriter is assuming that the demand for Indians tickets is A. perfectly price elastic. B. relatively price elastic. C. perfectly price inelastic. D. relatively price inelastic.
D
According to a news story about the bus system in the Lehigh Valley in Pennsylvania, "Ridership fell 14 percent in 2012 after a 33 percent increase" in bus fares. Source: Dan Hartzell, "Rebounding from a 2012 Rate Hike, LANTA's Ridership Was up Last Year," (Allentown, PA) Morning Call, March 13, 2014 Given this information, the demand for bus trips is inelastic . The best explanation for this result is that A. these trips are a small portion of someone's budget. B. over time people can find alternate forms of transportation. C. bus trips only appeal to a certain market. D. bus trips are a necessity for those without cars.
D
Assume that a combination of 10 bottles of wine and 2 liters of milk lies on a consumer's budget constraint. If the price of one bottle of wine is $10, and one liter of milk is $1, what is the consumer's income? A. $100 B. $120 C. $20 D. $102
D
Consider the supply of oiloil. What would make the supply of oiloil more elastic? The supply of oiloil would become more elastic if A. it becomes a larger portion of a consumer's budget. B. it were more of a luxury. C. the definition of the market becomes narrower. D. the time horizon becomes longer. E. more substitutes were available.
D
For which of the following products is the price elasticity of demand (in absolute value) the largest? a automobiles B. cigarettes C. milk D. Tide liquid detergent
D
From the list below, select the variable that will cause the supply curve to shift: A. Prices of related goods B. Consumer income C. Population and demographics D. The cost of raw materials
D
If the cross-price elasticity of demand is negative, then the products are: A. unrelated, but if it is positive, then the products are related. B. substitutes, but if it is positive, then the products are complements. C. inferiorinferior goods, but if it is positive, then the products are normalnormal goods. D. necessities, but if it is positive, then the products are luxuries E. complements, but if it is positive, then the products are substitutes.
D
In late 2014, oil prices were falling but some energy traders were convinced that oil prices would begin to rise within a few months. According to a news story, these expectations were causing some "traders to put oil in storage while they wait for prices to rise." Source: Nicole Friedman, "Saudi Arabia's Surprise Move Spurs Quirk for U.S. Oil Futures," Wall Street Journal, November 4, 2014. Holding some oil in storage rather than selling it would A. increase the supply of oil, shifting it to the right. B. increase the supply of oil, shifting it to the left. C. decrease the supply of oil, shifting it to the right. D. decrease the supply of oil, shifting it to the left.
D
In many cities, firms that own office buildings can renovate them for use as residential apartments. According to a news story, in many cities "residential rents are surpassing office rents." Source: Eliot Brown, "Developers Turn Former Office Buildings Into High-End Apartments," Wall Street Journal, May 7, 2014. The response to an increase in residential rents would be A. an increase in the supply of office space, shifting it to the right. B. a decrease in the supply of office space, shifting it to the right. C. an increase in the supply of office space, shifting it to the left. D. a decrease in the supply of office space, shifting it to the left.
D
The demand curve for canned peas is downward sloping. If the price of canned peas, an inferior good, rises, A. both the income and substitution effects reinforce each other to decrease the quantity demanded. B. the income and substitution effects offset each other but the price effect of an inferior good leads you to buy more canned peas. C. the income effect which causes you to reduce your canned peas purchases is smaller than the substitution effect which causes you to increase your purchases, resulting in a net increase in quantity demanded. D. the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in the quantity demanded.
D
The price elasticity of demand in the United States for crude oil has been estimated to be minus−0.061 in the short run and minus−0.453 in the long run. Source: John C. B. Cooper, "Price Elasticity of Demand for Crude Oil: Estimate for 23 Countries," OPEC Review, March, 2003, pp. 1-8. The demand for crude oil A. is more price inelastic in the long run than in the short run because in the short run a substitute for crude oil may be found. B. is more price elastic in the long run than in the short run because in the long run a substitute for crude oil may be found. C. is equally price inelastic in both the short and long run as there are not many substitutes for crude oil. D. is price elastic in both the short and long run as there exists many substitutes for crude oil.
D
An article in the Wall Street Journal about the financial problems of the New York Metropolitan Opera contained the observation that "a ticket-price increase in 2012 backfired." Source: Jennifer Maloney, "A Mixed Bill at the Metropolitan Opera," Wall Street Journal, July 1, 2014. a. The observation that an increase in ticket prices to the opera "backfired' means that A. total revenue from ticket sales increased following the price increase. B. ticket sales increased following the price increase. C. ticket sales decreased following the price increase. D. total revenue from ticket sales decreased following the price increase. The demand for opera tickets to the Metropolitan Opera is A. elastic because total revenue from ticket sales decreased following the price increase. B. inelastic because total revenue from ticket sales decreased following the price increase. C. inelastic because total revenue from ticket sales increased following the price increase. D. elastic because total revenue from ticket sales increased following the price increase.
D,A
The production possibilities frontier will shift outward A. if production occurs outside the production possibilities frontier. B. if resources are not used in production. C. if resources are used to produce consumption goods. D. if technology declinesif technology declines. E. if resources are used to produce capital goods if resources are used to produce capital goods.
E
We can show economic inefficiency: A. with points inside and on the production possibilities frontier. B. with points on and outside the production possibilities frontier. C. with points on the production possibilities frontier. D. with points outside the production possibilities frontier. E. with points inside the production possibilities frontier.
E
MIT economist Jerry Hausman has estimated the price elasticity of demand for Post Raisin Bran cereal to be minus−2.5 and the price elasticity of demand for all types of breakfast cereals to be minus−0.9. The demand for Post Raisin Bran cereal is elastic , and the demand for all types of breakfast cereals is inelastic . Why might the demand for Post Raisin Bran cereal be more elastic than the demand for all types of breakfast cereals? Post Raisin Bran cereal A. is defined more narrowly .B. is more of a necessity. C. has fewer substitutes availablehas fewer substitutes available. D. is a smaller share of a consumer's budget. E. is consumed over a shorter period of time.
a
When buyers and sellers operate in a competitive market, they are A. Following their own self-interest, doing whatever serves them best. B. Following their own self-interest, but wanting the economy to operate efficiently. C. Trying to ensure that markets work. D. Trying to take advantage of the other person. E. A and C above.
a
opportunity cost
a benefit that a person could have received, but gave up to take another course of action
The substitution effect is the change in the quantity demanded of a good that results from ______________, holding constant the effect of the price change on consumer purchasing power A. a change in the price of a substitute for the good B. a change in price making the good more or less expensive relative to other goods C. an increase in the usefulness of a product as the number of consumers who use it increases D. the tendency of people to be unwilling to sell something they own
b
Which of the following is the textbook's definition of a supply curve? A. a table that shows the relationship between the price of a product and the quantity of the product supplied B. a curve that shows the relationship between the price of a product and the quantity of the product supplied C. the quantity of a good or service that a firm is willing to supply at a particular price D. None of the above.
b
Which of the following is the textbook's definition of a supply schedule? A. a curve that shows the relationship between the price of a product and the quantity of the product demanded B. a table that shows the relationship between the price of a product and the quantity of the product supplied C. the quantity of a good or service that a firm is willing to supply at a particular price D. None of the above.
b
Consider the demand for cigarettes. Suppose the government increasesincreases the price of cigarettes by raisingraising cigarette taxes. How will this affect the demand for cigarettes over time? If the price of cigarettes increasesincreases, then the quantity of cigarettes demanded will A. decrease, and this effect will likely remain constant over time. B. increase, and this effect will likely become larger (in absolute value) over time. C. decrease, and this effect will likely become larger (in absolute value) over time. .D. decreasedecrease, but this effect will likely become smaller (in absolute value) over time. E. likely never change either initially or over time.
c
Consider the markets for BP supreme-grade gasoline, all BP grades of gasoline, and all gasoline. For which of these three markets will demand be most elastic? Demand will be most elastic for A. all gasoline, then for all BP grades of gasoline, and then for BP supreme-grade gasoline. B. BP supreme-grade gasoline, then for all gasoline, and then for all BP grades of gasoline. C. BP supreme-grade gasoline, then for all BP grades of gasoline, and then for all gasoline. .D. all BP grades of gasoline, then for BP supreme-grade gasoline, and then for all gasoline. E. all gasoline, then for BP supreme-grade gasoline, and then for all BP grades of gasoline.
c
If demand is perfectly elastic, then what is the effect of an increase in price? A. a very small change in quantity demanded B. no change in quantity demanded C. a decrease in quantity demanded to zero D. a change in quantity demanded exactly equal to the change in price
c
When buyers buy goods in a market they are doing so because A. They choose the efficient allocation. B. They do not like the other good c. They prefer the good to the other good. D. A and B above. E. A and C above
c
When quantity demanded is completely unresponsive to price, what is the value of price elasticity of demand? A. A number between 0 and 1 B. 1 C. 0 D. A negative number
c
Which of the following goods is likely to have an income elasticity of demand greater than one? A. Salt B. Gasoline C. Diamond jewelry .D. Bread
c
what happens when the budget goes up
constraint shifts outward
The income effect causes quantity demanded to ________ when the price of a normal good decreases, and causes quantity demanded to ________ when the price of an inferior good decreases. A. decrease; decrease B. increase; increase C. decrease; increase D. increase; decrease
d
When the price of a product changes, A. it only causes a substitution effect by changing the relative price of the product. B. it only causes an income effect by changing the purchasing power of the consumer. C. it changes the relative price of the product causing a network effect and at the same time it changes the purchasing power of the buyer causing an income effect as well. D. it changes the relative price of the product causing a substitution effect and at the same time it changes the purchasing power of the buyer causing an income effect as well
d
Which of the following can be derived from other assumptions of economics A. Scarcity. B. Tradeoffs. C. Opportunity costs. D. B and C above. E. A and B above.
d
Which of the following describes the substitution effect of a price change? A. The change in quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant. B. The change in demand that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. C. The change in quantity demanded of a good that results from the change in the price of a substitute for the good. D. The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
d
If you have a competitive equilibrium for a two market economy consisting of tacos and enchiladas then A. The market equilibrium quantity of tacos is efficient. B. The market equilibrium quantity of enchiladas is efficient. C. The sellers of tacos have higher costs than other potential sellers. D. All of the above. E. A and B above.
e
negative
implies that two variables tend to move in opposite direction
positive
implies that two variables tend to move in the same direction
positive economic statements
objective statements about the world; what is (test we can prove)
causation
occurs when one thing directly affects another
quantity demanded
the amount of a good or service that a consumer is willing and able to purchase
substitution effect
the change in the quantity demanded of a good that results because a change in price to other goods that are substitutes
income effect
the change in the quantity demanded of a good that results because a change in the good`s price increases or decreases consumers purchasing power
law of demand
the inverse relationship between the price of a product and the quantity of the product demanded
ceteris paribus condition
the necessity of holding all variables other than the price constant in constructing a demand curve
what does the slope of a budget constraint represent
the opportunity cost of one good over another
what is economics
the study of scarcity and how society deals with it
zero
two variables are not related
correlation
two variables tend to change at the same time
scarcity
wants>resources
normative economic statements
what we should do; what people ought to do