macroeconomics

The market system's answer to the fundamental question "What will be produced?" is essentially -"Goods and services that are profitable" -"Low-cost goods and services" -"Goods and services that can be produced using large amounts of capital" -"Goods and services that posses lasting values"

"Goods and services that are profitable"

Refer to the diagram. If this is a competitive market, price and quantity will move toward:

$40 and $150, respectively

Answer the question on the basis of the given supply and demand data for wheat -$4 -$3 -$2

-$2

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand? -diminishing marginal utility -the rationing function of prices -the substitution effect -the income effect

-diminishing marginal utility

An increase in immigration would shift the production possibilities curve to the left. T/F

FALSE

An increase in quantity supplies might be caused by an increase in production costs T/F

FALSE

Macroeconomics explains the behavior of individual households and business firms; microeconomics is concerned with the behavior of aggregates or the economy as a whole T/F

FALSE

Refer to the diagram. Given production possibilities curve a, the combination of _____ economy. picture & T/F

FALSE

The fundamental economic problem faced by a society is that productive resources are so varied and versatile that is hard to decide what to do with them. T/F

FALSE

Surpluses drive market prices up; shortages drive them down T/F

False

Toothpaste and toothbrushes are substitute goods T/F

False

A government tax per unit of output reduces supply T/F

TRUE

Marginal analysis means that decision makers compare the extra benefits with the extra costs of a specific choice T/F

TRUE

The process by which capital goods are accumulated is known as investment T/F

TRUE

The wants of consumers are expressed in the product market with "dollar votes" T/F

TRUE

In a competitive market, every consumer willing to pay the market price can buy a product and every producer willing to sell the product at that price can sell it T/F

True

Which of the following will not cause the demand for product K to change? -a change in the price of close-substitute product J -an increase in income of buyers of product K -a change in the price of product K -a change in consumer tastes for product K

a change in the price of product of K

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity -an increase in supply -an increase in demand -a decrease in supply -a decrease in demand

an increase in supply

A leftward shift of the supply curve for oil in the United States is most likely to result from -a decrease in the fees that oil companies must pay for drilling licenses -an increase in the subsidy for oil exploration and drilling -a decrease in the world price of oil -an increase in the costs of exploration and drilling for oil

an increase in the costs of exploration and drilling for oil

In the circular flow model of the market system, households' major role is to -buy both products and resources -sell both products and resources -buy products and sell resources -sell products and buy resources

buy products and sell resources

The main mechanism that regulates the market system is -self-interest -private property -competition -freedom of enterprise and choice

competition

A shift to the right in the demand curve for product A can be most reasonably explained by saying that

consumer preferences have changed in favor of A so that they now want to buy more of each possible price

the relationship between quantity supplied and price is ___________, and the relationship between quantity demanded and price is ____________

direct; inverse

A normal good is one -whose amount demanded will increase as its price decreases -whose amount demanded will increase as its price increases -whose demand curve will shift leftward as incomes rise -for which the consumption varies directly with income

for which consumption varies directly with income

A price ceiling means that -there is currently a surplus of the relevant product -government is imposing a legal price that is typically below the equilibrium price -government wants to stop a deflationary spiral -government is imposing a legal price that is typically above the equilibrium price

government is imposing a legal price that is typically below the equilibrium price

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the - cost effect -inflationary effect -income effect -substitution effect

income effect

The equilibrium price and quantity in a market usually produce allocative efficiency because -all consumers who want the good are satisfied -marginal benefit and marginal cost are equal at that point -equilibrium ensures an equitable distribution of output -the excess of goods produced at equilibrium guarantees that all will have enough

marginal benefit and marginal cost are equal at that point

Which of the following is a distinguishing feature of laissez-faire capitalism? -public ownership of all capital -central planning -minimal government intervention -a circular flow of goods, resources, and money

minimal government intervention

All of the following would affect the position of the supply curve for cranberries, except the -popularity of cranberry drinks -price of agricultural land for cranberries -cost of fertilizer for cranberry production -development of a new pest control for cranberries

popularity of cranberry drinks

The law of demand states that, other things equal, -price and quantity demanded are inversely related -the larger the number of buyers in a market, the lower will be product price -price and quantity demanded are directly related -consumers will buy more of a product at higher prices than at lower prices

price and quantity demanded are inversely related

If the supply of a product decreases and the demand for that product simultaneously increases, than equilibrium -price must rise, but equilibrium quantity may rise, fall, or remain unchanged -price must rise and equilibrium quantity must fall -price and equilibrium quantity must both increase -price and equilibrium quantity must both decline

price must rise, but equilibrium quantity may rise, fall, or remain unchanged

An increase in demand coupled with a simultaneous and bigger decrease in supply will cause equilibrium -price to go up and quantity to go down -price to go up and quantity to go up -price to go down and quantity to go down -price to go down and quantity to go up

price to go up and quantity to go down

The law of supply indicates that, other things equal,

producers will offer more of a product at high prices than at low prices

An effective price floor on wheat will -force otherwise profitable farmers out of business -result in a shortage of wheat -result in a surplus of wheat -clear the market for wheat

result in a surplus of wheat

Specialization in production is important primarily because it -results in greater total output -allows society to avoid the coincidence-of-wants problem -allows society to trade by barter -allows society to have fewer capital goods

results in greater total output

In deciding whether to study for an economics quiz or go to a concert, one is confronted by the idea(s) of: -scarcity and opportunity costs -money and real capital -complementary economic goals -full production

scarcity and opportunity costs

Economics may best be defined as the -interaction between macro and micro considerations -social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity -empirical testing of value judgements through the use of logic -study of why people are rational

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. Given

supply has decreased and equilibrium quantity has decreased

Opportunity costs exist because -the decision to engage in one activity means forgoing some other activity -wants are scarce relative to resources -households and businesses make rational decisions -most decisions do not involve sacrifices and trade-offs

the decision to engage in one activity means forgoing some other activity

Other things equal, which of the following might shift the demand curve for gasoline to the left? -the discovery of vast new oil reserves in Montana -the development of a low-cost electric automobile -an increase in the price of train and air transportation -a large decline in the price of automobiles

the development of a low-cost electric automobile

Graphically, the market demand curve is -steeper than any individual demand curve that is part of it -greater than the sum of the individual demand curves -the horizontal sum of individual demand curves -the vertical sum of individual demand curves

the horizontal sum of individual demand curves

If there is a shortage of product X, and the price is free to change -fewer resources will be allocated to the production of this good -the price of the product will rise -the price of the product will decline -the supply curve will shift to the left and the demand curve to the right, eliminating this shortage

the price of the product will rise

At the point where the demand and supply curves for a product intersect, -the selling price and the buying price need not be equal -the market may, or may not, be in equilibrium -either a shortage or a surplus of the product might exist, depending on the degree of competition -the quantity that consumers want to purchase and the amount producers choose to sell are the same

the quantity that consumers want to purchase and the amount producers choose to sell are the same

productive efficiency refers to -the use of the least-cost method of production -the production of the product mix most wanted by society -the full employment of all available resources -production at some point inside of the production possibilities curve

the use of the least-cost method of production

Which of the following is most likely to be an inferior good? -gold watches -ocean cruises -used clothing -steak

used clothing

In economics, the pleasure, happiness, or satisfaction received from a product is called: -marginal cost -rational outcome -status fulfillment -utility

utility

In which of the following statements are the items "demand" and "quantity demanded" used correctly? -when the price of ice cream rose, the demand for both ice cream and ice cream toppings fell -when the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell - when the price of ice cream rose, the demand for ice cream fell, and the quantity demanded of ice cream toppings fell - none of these statements use the terms correctly

when the price of ice cream rose, the QUANTITY demanded of ice cream fell, and the demand for ice cream toppings fell.

Increasing marginal costs of production explains -the law of demand -the income effect -why the supply curve is upsloping -why the demand curve is downsloping

why the supply curve is upsloping