Micro Test 1

Which would be a likely cause of an increase in the demand for pizza?

A health report showing eating pizza reduces stress (D)

Refer to the above table. A shortage of 1500 units will occur when the price is:

$10 per unit (A)

Blossom, Inc. sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs forces Blossom to raise price to $9, and the firm only manages to sell 460 bottles of perfume. The price elasticity of demand is (in absolute value):

0.33 and inelastic (C)

In a free-market economy, a product which entails a positive externality will be:

Underproduced (B)

Refer to the table above. A change from combination C to B means that:

1 unit of steel is given up to get15 more units of wheat (C)

Refer to the above table. In moving from possibility C to D, the opportunity cost of a unit of steel in terms of unit of wheat is:

20 (B)

If the price of cheese falls by one percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese has a value of

3 (D)

When economists describe "a market", they mean:

A system that allows buyers and sellers to interact with one another (D)

A television station reports that the price of coffee has increased but the quantity traded in the market has decreased. This situation would be caused by a(n):

Decrease in supply (D)

When the price of lettuce rises, the demand for salad dressing ___________ because these two goods are complements.

Decreases (B)

To increase total revenue, firms with ____________ demand should lower price and firms with ____________ demand should increase price.

Elastic; inelastic (B)

A characteristic of the market system is:

Extensive use of capital goods (C)

A decrease in supply, holding demand constant, will cause:

Higher prices and a smaller quantity sold (B)

Which of the following statements is true?

If demand decreases, then price will decrease (B)

Refer to the table above. In moving stepwise from possibility A to B to C...to F, the cost of a unit of steel in terms of wheat:

Increases (A)

By requiring car producers to install emission control devices on cars, the government forces these producers to internalize some of the external costs of auto pollution. This will lead to the equilibrium price of cars:

Increasing and the quantity decreasing (D)

As a consequence of the problem of scarcity:

Individuals have to make choices from among alternatives (B)

Refer to the table above. According to the production possibilities schedule, a combination of 3 units of steel and 30 units of wheat:

Is attainable but entails some unemployment or inefficient use of society's resources (B)

Which of the following statements about the right to private ownership is false?

It weakens the incentive to maintain the property that one already owns (D)

The major problem with paired-choice majority voting is that the outcome:

May depend on the order of the voting (C)

It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. As a result, operators of hydroelectric power-generating plants downstream along the river find that they must clean up the river's water before it flows through their equipment. In the situation described above, we would expect an:

Overproduction of paper in the mills (A)

Refer to the above graph. A decrease in supply would best be reflected by a change from:

Point 2 to point 1 (A)

Refer to the above graph. An increase in the quantity supplied, other factors constant, would best be reflected by a change from:

Point 3 to point 4 (D)

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is:

Price inelastic (B)

A movement along a given supply curve for a product is caused by a change in the:

Price of the product (C)

If a good that generates negative externalities were priced to take these negative externalities into account, then its:

Price would increase and its output would decrease (C)

"For whom is given mix of goods and services to be produced? How in other words, are the society's outputs to be disturbed among its members?" In a market economy, this problem is resolved primarily in the:

Private sector through the earning and spending of income (C)

If product Y is an inferior good, a decrease in consumer incomes will:

Shift the demand curve for product Y to the right (D)

Refer to the above table, which shows the ranked preferences of voters for three alternative projects, with "1" being top preference. This situation illustrates the voting inconsistency where a majority of voters prefer the:

Stadium over the jail, the jail over the park, and the park over the stadium (C)

Which of the following is a determinant of supply?

Technology (D)

Assume a consumer finds that his total expenditure on compact discs stays the same after the price of compact discs declines. Which of the following is true for this price change?

The consumer's demand for compact discs in unit price elastic (E)

Other things being equal, the law of demand suggest that as:

The price of 3-D TVs decreases, the quantity demanded will increase (C)

Opportunity cost is best defined as:

The value of the best forgone alternative (C)