microeconomics ch 1-4

Macroeconomics

The study of the economy as a whole

which of the following is true about renewable natural resources?

They are a type of land resource such as forests, range-lands, and marine fisheries that naturally regenerate and thus can tolerate a sustained harvest, but can be depleted from excessive harvest.

which would be least likely to cause the ppc to shift to the right?

a decrease in unemployment

What is used to illustrate an independent relationship between two variables?

a horizontal or vertical line

which of the following is not an example of a capital output?

a persons skills and abilities

explain why both nations with high living standards and nations with low living standards face the problem of scarcity.

a poor nation with many people who lack food, clothing and shelter certainly experiences wants beyond the availability of goods and services to satisfy these unfulfilled wants. on the other hand, no wealthy nation has all the resources necessary to produce everything everyone in the nation wants to have.

consumer surplus measures the value between the price consumers are willing to pay and the

actual price paid

A nation can accelerate its economic growth by

adding to its stock of capital.

Deadwieght loss is the result of

all of the above

an outward shift of an economy's ppc is caused by

all of the above

if the quantity supplied exceeds the quantity demanded in a market, what is the result?

all of the above

Suppose two variables are directly related. If one variable rises, then the other variable

also rises

which of the following would not cause market demand for a normal good to decline?

an increase in the price of a substitute

which of the following causes the demand for veggie burgers to increase?

an increase in the price of tofu burgers, perceived as a substitute by veggie burger consumers

the law of demand is the principle that there is ______ relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus

an inverse

which of the following reasons could explain why an economy would be operating inside its PPC

because of unemployment or underemployment of labor, perhaps due to discrimination against employing workers of a certain race or gender

suppose X and Y are substitutes. if the price of Y increases, how will this change the market equilibrium for X?

both equilibrium price and quantity rise

if goods A and B are complements, and the price of good B rises, how will this affect the market equilibrium for good A?

both price and quantity will fall

why isnt money considered capital in economics?

capital in economics means a factor of production, such as a factory or machinery. money is not considered a resource. money is used to purchase land labor or capital.

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has

confused association and causation.

deadweight loss is computed as the net of

consumer surplus + producer surplus

the subject of economics is primarily the study of

decision making because of the problem of scarcity

Under the law of demand, any increase in price will cause ____ in quantity demanded.

decrease

a leftward shift in the demand curve is called an

decrease in demand

which of the following causes a shortage to become larger?

decrease in price

An increased equilibrium price and a decreased equilibrium quantity results from

decrease in supply

a decrease in demand with the supply held constant leads to an

decreased equilibrium price and a decreased equilibrium quantity

the law of supply is the principle that the relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus, is

direct

When an inverse relationship is graphed, the resulting line or curve is

downward sloping

The ability of an economy to produce greater levels of output is called

economic growth

which of the following is not an example of market failure

efficient equilibrium

suppose the federal government provides wheat farmers with a price floor above the market equilibrium price of wheat, creating a surplus. which of the following causes a reduction in the surplus of wheat?

elimination of the price floor

If the price of a textbook rises and then students purchase fewer textbooks, an economic model can show a cause-and-effect relationship only if which of the following conditions holds:

everything else is constant

There is news that the price of Tucker's Root Beer will increase significantly next week. If the demand for Tucker's Root Beer reacts only to this factor and shifts to the right, the position of this demand curve has reacted to a change in

expectations

which of the following increases the supply of corn?

farmers who grow soybeans can also grow corn, and the price of soybeans drops by 75%

If a PPC has capital on the vertical axis and consumer goods on the horizontal axis, which of the following is true?

greater emphasis on the production of capital today leads to greater outward shifts in the PPC thus increasing the wealth of people in the future

three different economies have made choices about the production of capital goods. which of the following is most likely to produce the greatest growth in the production possibilities curve?

greater production of capital goods than what is needed to replace worn out capital

which of the following describes the ceteris paribus assumption?

if we decrease the price of a good and observe that there is an increase in the quantity demanded, holding all other factors that influence this relationship constant

which word indicates that an economist is using positive economics?

if-then

which of the following is not true about a production possibilities curve? the curve

indicates which production point will be chosen

low income families consume proportionately more of which of the following kinds of goods?

inferior goods

what is the relationship between the price per pizza and the quantity of pizzas purchased?

inverse (price goes up, quantity goes down)

Because of scarcity

it is impossible to satisfy every desire and choices must be made

which of the following are factors of production?

land, labor, capital, entrepreneurship

the principle that the opportunity cost increases as the production of one output expands is the

law of increasing opportunity costs

economists believe that scarcity forces everyone to

make choices

when building a model an economist must

make simplifying assumptions

A curve that is derived by summing horizontally individual demand curves is called

market supply

producer surplus

measures the value between the actual selling price of a product and the price along the supply curve at which sellers are willing to sell the product. total surplus is the sum of consumer surplus and producer surplus.

consumer surplus

measures the value between the price consumers are willing to pay for a product along the demand curve and the price they actually pay

which of the following illustrates the concept of scarcity?

more clean air is wanted than is available, there is usually more than one use of your free time in the evening, and there are many competing uses for the annual budget of your city, country, or state.

a rational decision maker always chooses the option for which marginal benefit is _____ than marginal cost

more than

A cost imposed on people other than the consumers of a good or service is a

negative externality

Combinations of goods outside the production possibilities curve have which of the following characteristics?

none

which of the following would eliminate scarcity as an economic problem?

nothing

an economy can produce various combinations of food and shelter along a PPC. first, increase the production of shelter along the PPC; then continue to shift more and more production to the shelter. which of the following will most likely happen to the opportunity cost of a unit of shelter?

opportunity cost will increase because as more and more shelter is produced, labor and capital that is highly productive at producing food is being shifted to shelter production, and so more and more food is being given up to produce the extra shelter.

marginal analysis means evaluating ____ changes from a current situation.

positive or negative

in moving from a shortage toward the market equilibrium, which of the following is true?

price rises

producer surplus measures the value between the actual selling price and the

price sellers are willing to sell the product

If the cost of producing a good rises for sellers, then how will this affect the market equilibrium for that good?

price will rise and quantity will fall

which of the following is not a type of economic analysis?

resources

which of the following is true about the production possibilities curve when technological progress occurs?

shifts outward to the right

Assume no price ceiling exists in a market. Then a price ceiling is established below the market equilibrium. What would result?

shortage

suppose big-cat and fat-cat are rival cat good brands and the price of fat-cat is reduced. following the price drop, is there a shortage or a surplus of big-cat at the old price of big-cat?

shortage

an economy can produce various combinations of food and shelter along a PPC. suppose a technological innovation resulted in a new, higher yielding crop that generated more bushels of grain for a given set of land, labor and capital resources. if this innovation did not affect the productivity of shelter production, which of the following would be true?

the PPC will rotate outward along the food axis, but will not shift on the shelter axis

suppose an economy can produce various combinations of fish and bread. if more people with strong fishing skills became employed in this economy, how would the PPC change?

the PPC would shift outward on the fish axis, but would not change on the bread axis

in the study of economics, investment means

the accumulation of capital that is used to produce goods and services

deadweight loss

the fall in total surplus that results from a market distortion, such as a tax

suppose the average equilibrium monthly rental price of apartments and rooms in a college town has been steady at $600, but then the college expands enrollment from 10,000 to 12,000. suddenly there is a shortage of rental housing at the prevailing price of $600 which of the following is most likely true?

the shortage occurred because the demand increased, and a new market equilibrium will feature higher rental prices and more rental units available on the market

if there are external benefits for good X, which of the following is true?

the socially efficient amount of good X can be achieved if society subsidizes consumers of good X

microeconomics

the study of how households and firms make decisions and how they interact in markets

suppose the state of california imposes a min wage of $15 per hour. in the entry level labor market in california fast food restaurants, the quantity of labor supplied is 1.2 million. which of the following is true?

there is a surplus of 400,000 workers in the labor market

suppose the federal government imposes a price floor in the milk market at a price of $6 per gallon. if market quantity demanded at $6 is 1 billion gallons, and market quantity is 1.5 billion gallons, which of the following is true?

there is a surplus of 500 million gallons of milk and the federal government will buy these 500 million gallons to maintain the $6 price

deadweight loss results from

underproduction or overproduction

suppose the alternative uses for an hour of your time in the evening, ranked from best to worst, are 1) study economics, 2) watch two half hour sitcoms, 3) play video games, and 4) jog around town. you can choose only one activity. what is the opportunity cost of studying economics for one our given this information?

watching two half hour sitcoms

If an economy can produce various combinations of food and shelter along a production possibilities curve (PPC), then if we increase the production of shelter along the PPC, which of the following is true?

we must decrease the production of food. this forgone food production represents the opportunity cost of the increase in shelter.

which of the following best describes the 3 fundamental economic questions?

what to produce how to produce for whom

in an efficient market, deadweight loss is

zero

suppose each of the seven dwarfs buys four mugs of ginger ale per week from snow whites cafe, when the price per mug is 2$. if the seven dwarfs are the entire market demand for snow whites ginger ale, which of the following is the correct value for market quantity demanded of ginger ale per week at a price of $2?

28

With an upward-sloping supply curve, which of the following is true?

A decrease in price results in a decrease in quantity supplied

which of the following is an example of an organization using marginal analysis?

A government official considering what effect an increase in military goods production will have on the production of consumer goods

which of the following best illustrates the application of the model-building process to economics?

A labor economist notices that unemployment tends to be higher among teenagers than more experienced workers, develops a model, and gathers data to test the hypotheses in the model

which of the following best describes an entrepreneur ?

A person who combines the factors of production to produce innovative products

Why don't competitive markets do a good job providing public goods?

Because it is difficult to exclude people from gaining benefits from public goods without paying for them, and so market demand does not reflect the benefits to society from the public good

which of the following is the last step in the model building process?

Collect data and test the model

opportunity cost

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another

which of the following is the second step in the model building process?

Develop a model based on simplified assumptions

which of the following is the best definition of economics?

Economics is the study of how society chooses to allocate its scarce resources

which of the following represents positive economics?

If policy A is followed, then outcome B results

If society allows firms to freely pollute the environment, then which of the following is true?

Market equilibrium output will be too high relative to the efficient output level

a production possibilities curve is drawn based on which of the following assumptions?

None of the answers are correct

which of the following represents causality rather than association ?

Quantity demanded goes up when price falls because lower prices increase consumer purchasing power, and because some consumers of substitute goods switch.

Ceteris Paribus Assumption

The assumption that nothing changes except the factor or factors being studied.

which of the following pairs is most likely to exhibit an inverse relationship?

The price of a concert and the number of tickets people purchase

suppose a consumer is willing to pay $20 for one good X, $10 for a second, and $5 for a third, and the market price is $4 what is the consumer surplus

$23

suppose seller X is willing to sell one good X for $5, a second for $10, a third for $16, a fourth for $25, and the market price is $20. what is seller Xs producer surplus?

$29

suppose tucker inc is willing to sell one gizmo for $10, a second gizmo for $15, a third for $20, and the market price is $25. what is tucker incs producer surplus?

$30

if sam is willing to pay $50 for one good X, $30 for a second, $20 for a third, $8 for a fourth, and the market price is $10. what is sams consumer surplus?

$70

if a price ceiling is set at $10, and the equilibrium market price is $8 which price will consumers actually pay?

$8

The condition of scarcity

- cannot be eliminated - prevails in poor economies - prevails in rich economies