Essentials in economics (1-3,6&7)
A point or combination that is on the production possibilities curve is
attainable, and resources are fully employed.
"Because the outputs of many industries are the inputs to other industries, the failure of nay single industry to fulfill the output quantities specified in the central plan caused a chain reaction of adverse repercussions on production" This quotation best identifies the
coordination problem under central planning.
In the following question you are asked to determine, other things equal, the effects of a given change in a determination of demand of supply for product X upon (1) the deman (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X.
decrease D, decrease P, and decrease Q
A straight line downward sloping demand curve has a price elastic of demand which
decrease as price decreases
private property
encourages investment since people know what they own can't just be taken away from them.
Barter
entails the exchange of goods for goods.
Low cost production is not important for Bitcoin miners since Bitcoin is intangible and exits only in cyberspace
True
The term consumer sovereignty means that
What is produced is ultimately determined by what consumers buy
Answer the question based on the given supply and demand data for wheat. If the price in this market was $4
farmers would not be able to sell all their wheat
Which of the following does not foster innovation and technological advance?
fear and avoidance of risk.
Refer to the tables. Opportunity costs are:
increasing in both Duckistan and Herbania.
Suppose that the total revenue curve is derived from a particular linear demand curve. That demand curve must be
inelastic for price declines that increase quantity demanded from 6 units to 7 units
If total utility is increasing, than marginal utility
may either be increasing or decreasing, but it must be greater than zero
Refer to the diagram. The concept of opportunity cost is best represented by the
move from A on PP1 to B on PP1
an inferior good is
not accurately defined by any of these statements.
The invisible hand refers to the
notion that, under competition, decisions motivated by self interest promote the social interest.
The notion of "purposeful behavior" in the economic perspective suggests that
one persons choice may differ from another if their circumstances and information differ.
Refer to the graph. Which of the following schedules correctly reflects "supply"?
option C
If quantity demanded is completely unresponsive to price changes, demand is
perfectly inelastic
For economists, the word "utility" means:
pleasure or satisfaction
Refer to the budget line shown in the diagram. If the consumer's money income is $100, the
price of C is $20 and the price of D is $10
Which of the following is a fundamental characteristic of the market system?
property rights
Will the price ceiling result in a shortage or surplus of masks
shortage
Suppose that corn prices rise significantly. I f farmers expect the price of corn to continue rising relative to other crops, then we would expect
the supply to increase as farmers plant more corn
In a market system, the distribution of goods and services among consumers is largely determined by
the willingness and ability of consumers to pay the prices.
Camille is at the candy store with Grandma Mary, who offers to buy her $6 worth of candy. If lollipops are $1 each and candy bars are $2 each, what combination of candy can Camille's Grandma Mary buy her?
two lollipops and two candy bars
Which of the following statements is correct?
when marginal utility is positive, an increase in the quantity consumed will increase total utility
Refer to the diagram. If society is currently producing 5 units of bicycles and 6 units of computers and it now decides to increase computer output to 8, the cost:
will be 5 units of bicycles.
Refer to the above diagram for the milk market. There would be equilibrium whenever the price is
$1.50 per gallon
Suppose a firm can produce 70 units of a product, Zenia by combining labor, land, capital, and encouragement ability, as in the four alternative techniques shown in the table below. Assume further that the firm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship at $9 per unity. Refer to the provided table, and suppose that the firm uses production technique D. If each of the 70 units of Zenia that are produced sells for $1 apiece, then how much will be the total profits of the firm from 70 units of Zenia?
$13
how much is the shortage?
3000
How many masks do people want to buy at the price ceiling?
3050
which of the following is true about generic frozen dinners?
Generic frozen dinners are an inferior god
What is the relationship between gigabytes of data and audio books for you?
Gigabytes of data and audio books are substitutes for me
Refer to the graphs. Assume that pizza is measured in slices and beer in pints. In which off the graphs is the opportunity cost of a pint of beer equal to one slice of pizza?
Graph D
A market system tends to restrict business risk to owners and investors. The results in which of the following benefits?
Firms are better able to attract inputs, as these inputs do not have to share the risk.
Refer to the provided production possibilities curves. Curve (a) is the current curve for the economy. Focusing on curve (a), point N suggests that the economy currently produces
fewer goods for the future than at point P.
If there's upward pressure on price, how does the affect the supply side of the market?
There will be an upward movement along the supply curve.
Which of the following statement is correct?
Total utility is the accumulation or summation of marginal utility.
Assume that a consumer has a given budget or income of $24 and that she can buy only two goods, apples or bananas. The price of an apple is $3 and the price of a banana is $2. For this consumer, the opportunity cost buying one more apple
1.5 bananas
Refer to the diagram. The highest price that buyers will be willing and able to pay for 100 units of this product is
$60
Refer to the table. If demand is represented by column (3) and (1) and supply is represented by column (3) and (4), equilibrium price and quantity will be
$8 and 50 units
At a price of $10 per unit, Gadget Inc. is willing to supply 14,000 gadgets, while United Gadgets is willing to supply 11000 gadgets. If the price were to raise to 16000 and 15000. If these are the only two firms supplying gadgets, what is the elasticity of supply in the market for gadgets?
0.64
The price of seasons tickets to a performing arts theater decreases by 20 percent. As a result, the quantity demanded increases by 14 percent. The price elasticity of demand fro season tickets is
0.7
Answer on the basis of the relationships shown in the four figures. The amount o y is directly related to the amount of x in
1 only.
A nation can provide two products: tanks and autos. The table below is the nation's production possibilities schedule
100 units of autos
Assume that a consumer has given budget or income of $10 and that she can buy only two goods, apples or bananas is $.50. If the consumer decides to buy 4 apples, how many bananas can she also buy with the remainder of her budget, assuming she exhaust her income?
12 bananas
Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K. What level of total utility is realized from the equilibrium combination of J and K, if the consumer has a money income of $28 and the prices of J and K are $8 and $4, respectively?
188 utils
The following graph is the production curve of a nation. The marginal opportunity cost of the second unit of bread is.
2 units of drill presses.
Refer to the data. The value for W is
20
okay, but how many masks are producers willing to supply at the lower price?
2450
At the new equilibrium price of $200, what is the new equilibrium quantity? how many masks are being purchased or exchanged?
2750
So when the demand curve shifted right and the market price was still $10 for the masks, what was the new quality demanded of masks? In other words, how many masks did people want to buy for $10 after the outbreak?
3500
Suppose a consumer has an income of $24, the price of A is $4, and the price of B $3. Which of the following combinations is on the consumers budget line?
3A and 4B
Refer to the table. What is the marginal utility of the forth unit?
44
Answer the question based on the table below showing the marginal utility schedules for product X and product Y for a hypothetical consumer. The price of product X is $4, and the price of product Y is $4. The income of the consumer is $24. If the consumer buys both product X and product Y, how much will the consumer buy of each in order to maximize utility?
4X and 2Y
The supply of product X is inelastic if the price of X rises by
5 percent and quantity supplied rises by 2 percent
how many masks were suppliers initially producing at the $10 price?
500
Which of the following combinations would be unattainable?
9 drills passes and 3 bread
Suppose you have a money income of $50, all of which you spend on Coke and popcorn. In the diagram, the prices of Coke and popcorn, respectively, are
@2.50 and $5.oo.
If Connecting U drops its price by another 10 percent, how will their customers change their quantity demanded?
Along with the rest of Connecting U's customers, I will increase mu quantity demanded by 6 percent.
Connecting U dropped its price from $20 to $16 per gigabyte of data. Joe, according to the midpoint formula, Connecting U reduced its price by what percentage?
Connecting U dropped the price for a gigabyte of data by 22.2 percent
If connecting wants to maximize its profits (the equivalent of maximizing revenue in this case) what should they do?
Connecting u should drop the price $14.48. by dropping the price, they will increase their total revenue and profits.
A nations consumption is strictly limited by its production possibilities, even with specialization and international trade.
False
If A is the dependent variable and B is the independent variable, then change in A results in a change in B.
False
If people tried to produce most of what they need on their own, then this would lead to a more efficient use of the economy's resources.
False
In the circular flow model, households ct as buyers in the resource markets.
False
The invisible hand refers to the many indirect controls that the federal government imposes in a market system.
False
The lower the consumer's income, the higher his or her budget line.
False
Which of the following is one of the Five Fundamental Questions?
How will the system promote progress?
Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $3 and $1, respectively. Which technique is economically most effect id producing A?
III
Which of the following is correct?
If marginal utility is diminishing and is a positive amount, total utility will increase.
At the price of $10 people wanted 3,500 make and suppliers were producing 500. What is this called again -- when quantity demanded exceeds quantity supplied?
It is called a shortage.
Which of the following is the main problem with the barter system of exchange?
It requires a coincidence of wants.
If Connecting U drops its price by 10 percent, their total costs will not be affected. What will happen if Connect U decreases its price by another 10 percent?
Lowering price will decrease Connecting U's total revenue and profits.
which of the following statements is an explanation for the law of increasing opportunity costs
Many economic resources are better at producing one product rather than another.
Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are $.6 per bottle and $.4 per bag respectively. It can be concluded that:
Mrs. Arnold should spend more on soda and less on pretzels.
what is your cross price elasticity between audio books and gigabytes of data?
My cross price elasticity is 1.56
What percentage does your demand for audio books fall as a result of the price change for gigabytes of data?
My demand for audio books decreases by 50 percent
Is it sure regarding your own price elasticity for date at these prices
My demand is elastic
If another phone service provider enters the market and forces Connecting U to drop the price of a gigabyte down even further than $16 -- lets say they drop it by additional 22.2% -- what will probably happen to your quantity demanded of data
My quantity demanded will increase but by less than 40 percent
Which of the following statements about self interest in a market system is false?
Self interest to business as they attempt to maximize their production costs.
Answer the question based on the following information: Suppose 10 units of product x can be produced by employing just labor and capital in the three ways shown below. Assume the prices of labor and capital are as shown. Which technique is the most economically efficient?
Technique III with total costs of $17
So before the outbreak of the virus, the equilibrium market price of one N95 mask was $10. After the outbreak, the equilibrium market price shout up to $200 for the same mask! what happened in the market for N95 masks?!!
The demand for masks increased sharply.
Why is it elastic?
There are two close substitutes in the market: gigabytes of data from Connecting U and Mega Bytes.
Refer to the above diagram for the milk market. If the price were more than $1.50 per gallon, then there would be
a surplus in the market
Which of the following exemplifies a microeconomic question?
Will a new type of electronic reader or tablet increase the number of buyers?
Suppose the income elasticity of demand for toys is -1.5. This means that
a 10 percent increase in income will decrease that purchase of toys by 15 percent.
What can cause the market demand curve for day old bread -- an inferior good -- to shift rightward (an increase in demand)?
a decrease in consumers incomes
tapas
a decrease in the number of tapas sellers
What can cause the market equilibrium price and quantity of bagels -- a normal good -- to decrease?
a decrease in the price of English muffins - a substitute for bagels
What can cause the market equilibrium price of blueberry yogurt to decrease?
a decrease in the price of strawberry yogurt -- a substitute for blueberry yogurt
Economists use the term "demand" to refer to
a schedule of various combinations of market prices and quantities demanded.
Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates that:
amount of oranges that will be available at various prices has declined.
What can cause the market supply curve for electric cars to shift rightward (an increase in supply)?
an advancement in technology that reduces the cost of making electric cars
What can cause the market supply curve for fruit juice to shift leftward (a decrease in supply)?
an increase in the price of apples -- an input to fruit juice
What can cause the market demand curve for oatmeal to shift leftward (a decrease in demand)?
an increase in the price of raisins -- a complement to oatmeal
Which of the following is true of an economy that operates entirely through central planning?
an individuals success in business is based on political savvy rather than economic profitability
If the price ceiling is effective, will it be above or below the market equilibrium price $200?
below
When tickets are "spaced" then in this market transaction
both the buyer and seller benefit
In the circular flow model of the market system, households major role is to
buy products and sell resources.
A perfectly inelastic demand schedule
can be represented by a line parallel to the vertical axis
A nation that devotes more of its resources to the production of capital goods rather than consumer goods is likely to
cause its production possibilities curve to shift outward.
A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 15 and the marginal utility of Y is 8. The unit price of X is $3 and the unit price of Y is $2. The utility maximizing rule suggests that this consumer should
decrease consumption of product Y and increase consumption of product X
A decrease in demand and an increase in supply will
decrease price and affect the equilibrium quantity in an indeterminate way.
If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then
demand is price elastic
IN markets where the supply curve is vertical, changes in
demand will not cause the equilibrium quantity to change.
Refer to data. Marginal utility becomes negative beginning with the
fourth unit
In a market system, if firms in an industry persistently earn total revenues that are less than total costs, then that industry will
have some firms go out of business.
The simple circular flow model shows that
households are on the selling side of the resource market and on the buying side of the production market.
A market is an equilibrium
if the amount producers want to sell is equal to the amount consumers want to buy
Refer to the diagram. which one of the following would shift the production possibilities curve from pp1 to pp2?
immigration of skilled workers into the economy.
When Connecting U dropped the price of a gigabyte of data from $20 to $16, Jamming Joe's quantity demanded increased from 2 gigabytes to 3 gigabytes of data -- a 40 percent increase in quantity demanded, according to the midpoint formula. What is the price elasticity for gigabytes data?
in absolute value, my own price elasticity ia about 1.8
income increased by 20 percent you decreased your demand for generic frozen dinners from 10 to 0. What is your income elasticity for generic frozen dinners?
income elasticity for generic frozen dinner is -10.0
Government subsidized student loans tend to
increase demand for higher education, causing the price of education to rise
Suppose product Y is an input in the production of product Z. Product Z in turn is a substitute for product X. An increase in the price of Y can be expected to
increase the demand for X
If the demand and supply curves for product X are stable, a government mandated increase in the price of X will
increase the quantity supplied of X and decrease the quantity demanded of X
At the current price, there is a shortage of a product. We would expect price to
increase, quantity demanded to decrease, and quantity supplied to increase.
Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will
increase, quantity demanded will decrease, and quantity supplied will increase.
A nation can produce two products: tanks and autos. The table below is the nation's production possibilities schedule. Given the production possibilities schedule above, a combination of 3 tanks and 350 autos.
is attainable but entails some unemployment or inefficient use of society's resources.
Answer the question on the basis of the following demand schedule. If this demand schedule were graphed, we would find that
its slope is constant throughout
Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is
less than 1, and therefore supply is inelastic
If you purchase a gift worth $12 for your sister, but your sister would be willing to pay only $8 is she bought the item for herself, then the
loss of value in the gift is $4
One reason that the quantity demanded of a good increases when its price falls is that the
lower price increases the real incomes of buyers, enabling them to buy more
Camiille's Creations and Julia Jewels both sell breads in a competitive market. If at the market price of $5 both are running out of breads to sell, then would expect both Camille's and Julia's to
raise their price and increase their quantity supplied
Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to
reduce the demand for soda and increase the demand for tacos
A characteristic of the market system is
reliance on the use of capital goods in indirect modes of production.
Refer to diagram. A decease in supply is depicted by a
shift from S2 to S1
Refer to the diagram for athletic shoes. If the current output of shoes is Q3, then
society would consider additional units of shoes to be less valuable than alternative products.
A leftward shift of a product supply, curve might be cause by
some firms leaving an industry
Which of the following is not correct? A typical production possibilities curve
specifies how much of each product a society will want to produce.
In 2018, the price of oil increased, which in turn contributed to a rise in the price of natural gas. This can best be explained by saying that oil and natural gas are
substitute goods, and the higher price for oil increased the demanded for natural gas.
(Consider this) An exception to the advice "go to college, stay in college, and earn a degree" occurs when
the opportunity cost of attending college is extraordinarily high.
A characteristic of centrally planned economics is that
the price is relatively unimportant in allocating resources.
