microeconomics exam 1

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If Francis receives a decrease in his pay, we would expect Francis's demand for each good he purchases to remain unchanged.

false

If a 15 percent increase in price causes a 30 percent decrease in quantity demanded, this product might have no close substitute.

false

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is 1/2 and supply is elastic.

false

If a good is "normal", then an increase in income will result in no change in the demand for the good.

false

If buyers now wanted to purchase larger quantities of Vanilla Coke, the demand curve for Vanilla Coke would shift to the left.

false

If sellers do not respond at all to a change in price, technological advancement must be great

false

If the elasticity of supply is zero, then supply is very elastic.

false

If the elasticity of supply of a product is 2.5, we know that supply is inelastic.

false

If the government wanted to enact a policy to increase living standards in the country, it might allow corporate tax write-offs for money spent on worker safety.

false

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price would result in a 4.0 percent decrease in the quantity demanded.

false

If the price of a substitute to good X increases, then the demand for good X will decrease

false

If the quantity supplied is the same regardless of price, then the supply curve would be elastic.

false

If the quantity supplied responds only slightly to changes in price, then supply is said to be elastic.

false

In a free market, suppliers determine how much of a good will be sold and the price at which it is sold.

false

In economics, the cost of something is the dollar amount of obtaining it.

false

In general, elasticity is the friction that develops between buyers and sellers in a market.

false

In most societies, resources are allocated by a single central planner.

false

Mallory decides to spend 3 hours working overtime rather than watching a video with her friends. She earns $8 an hour. Her opportunity cost of working is the $24 she earns working.

false

People make decisions at the margin by following tradition

false

Prices direct economic activity in a market economy by reducing scarcity of the goods and services produced.

false

Scarcity exists when there is less than an infinite amount of a resource or good.

false

Suppose your management professor has been offered a corporate job with a 30% pay increase. He has decided to take the job. For him, the marginal cost of leaving was greater than the marginal benefit.

false

The "invisible hand" directs economic activity through advertising.

false

The elasticity of a perfectly elastic supply curve equals 0.

false

The forces that make market economies work are price and quantity.

false

The greater the price elasticity of demand the more likely the product is a necessity

false

The price elasticity of supply measures how much the quantity supplied responds to changes in input prices

false

The price where quantity supplied equals quantity demanded is called the coordinating price.

false

The sum of all individual demand curves for a product is called total demand.

false

The unique point at which the supply and demand curves intersect is called market unity.

false

When quantity demanded responds only slightly to changes in price, demand is said to be unit elastic

false

When referring to the variables price and quantity demanded, price and quantity demanded are independent of each other.

false

When there is a shortage in a market, there is downward pressure on price.

false

When we move up or down a given demand curve, only price is held constant.

false

You love peanut butter. You hear on the news that 50 % of the peanut crop in the South has been wiped out, which will cause the price to double by the end of the year. As a result, your demand for peanut butter will increase by the end of the year.

false

A change in the price of the good or service would not shift the demand curve for a good or service.

true

A decrease in resource costs to firms in a market will result in a decrease in equilibrium price and an increase in equilibrium quantity.

true

A decrease in supply will cause the largest increase in price when both supply and demand are inelastic.

true

A demand curve is the downward-sloping line relating the price of the good to the quantity demanded.

true

A market is a group of demanders and suppliers of a particular good or service.

true

Alice says that she would buy one banana split a day regardless of the price. If she is telling the truth, Alice's demand for banana splits is perfectly inelastic

true

An example of a firm with market power is a cable TV provider in St. Louis

true

An example of an externality is the impact of pollution from a factory on the health of people in the vicinity of the factory.

true

As elasticity rises, the supply curve gets flatter.

true

As the elasticity of supply approaches infinity, very small changes in price will lead to very large changes in quantity supplied.

true

Both The Wealth of Nations and the Declaration of Independence share the point of view that individuals are best left to their own devices without the government guiding their actions.

true

Causes of market failure include externalities and market power.

true

Concerning a vertical supply curve, suppliers will not respond to a change in price.

true

Demand for a good would tend to be more inelastic the fewer the available substitutes.

true

Demand is inelastic if elasticity is less than 1.

true

Demand is said to be unit elastic if quantity demanded changes by the same percent as the price.

true

Economics is the study of how society manages its scarce resources.

true

Economists in general do not try to explain people's tastes, but do try to explain what happens when tastes change.

true

Efficiency refers to the size of the economic pie; equity refers to how the pie is divided

true

For most students, the largest single cost of a college education is the wages given up to attend school.

true

Funsters, Inc., the largest toy company in the country, sells its most popular doll for $15. It has just learned that its leading competitor Toysorama is mass producing an excellent copy and plans to flood the market with their $5 doll in 6 weeks. Funsters should increase the supply of their doll now before the other doll hits the market.

true

If a surplus exists in a market we know that the actual price is above equilibrium price and quantity supplied is greater than quantity demanded.

true

If buyers and / or sellers are price takers, then individually they have no influence on market price

true

If two supply curves pass through the same point and one is steep and the other is flat, the steeper supply curve is more inelastic.

true

In a market, to find the total amount supplied at a particular price, we must add up all of the amounts firms are willing and able to supply at that price.

true

New oak tables are normal goods. What would happen to the equilibrium price and quantity in the market for oak tables if the price of maple tables rises, the price of oak wood rises, more buyers enter the market for oak tables and the price of wood saws increased? Price will rise and the effect on quantity is ambiguous.

true

Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is the enjoyment and exercise he would have received had he played tennis.

true

Similar products, numerous sellers, and numerous buyers are all characteristics of a perfectly competitive market.

true

Suppose that demand decreases AND supply decreases. We would expect equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

true

Suppose that the incomes of buyers in a particular market for a normal good decline and there is also a reduction in input prices. In this market, we would expect the equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous

true

Suppose that the number of buyers in a market increases and a technological advancement occurs also. In this market, we would expect equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous

true

Suppose you like banana cream pie made with vanilla pudding. Assuming all other things are constant, you notice that the price of bananas is higher. Your demand for vanilla pudding would decrease.

true

The difference between slope and elasticity is that slope measures actual changes and elasticity measures percentage changes.

true

The income of a typical worker in a country is most closely linked to productivity.

true

The main determinant of the price elasticity of supply is time

true

The market supply curve shows the total quantity supplied at any price.

true

The opportunity cost of going to college is the value of the best opportunity a student gives up to attend college.

true

The price elasticity of demand measures a buyer's responsiveness to a change in the price of a good.

true

Those who buy the product or service ultimately determine the demand for a product of or service

true

Two goods are substitutes if a decrease in the price of one good increases the demand for the other good

true

What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages? Quantity will fall and the effect on price is ambiguous

true

When a supply curve is relatively flat, the supply is relatively elastic

true

When the government redistributes income from the rich to the poor, people work less and produce fewer goods and services.

true

Economists use the phrase "There is no such thing as a free lunch," to illustrate how inflation increases prices

false

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the demand curve will be steeper.

false

For a horizontal demand curve, slope is undefined and elasticity equals 0.

false

For economists, people's tastes and demand are beyond the realm of economics.

false

Henry decides to spend two hours playing golf rather than working at his job which pays $8 per hour. Henry's tradeoff is nothing, because he enjoys playing golf more than working.

false

A country with an aging population will generally experience no change in either market demand or individual demand for prescription drugs.

false

A demand curve illustrates the tradeoff between inflation and unemployment.

false

A good will have a more inelastic demand the greater the availability of close substitutes

false

A primary function of prices in a market economy is to provide participants with spending limits.

false

A rational decision maker takes an action only if the marginal benefit is less than the marginal cost.

false

A supply curve slopes upward because as more is produced, total cost of production falls.

false

A table that shows the relationship between the price of a good and the quantity demanded is called a demand table.

false

A very hot summer in Atlanta will cause the demand for lemonade to shift to the left.

false

According to the law of demand price and quantity supplied are inversely related

false

After much consideration, you have chosen Cancun over Ft. Lauderdale for your Spring Break trip this year. For this decision to change, the marginal benefit of Cancun must increase

false

An advance in production technology will increase a firm's costs

false

An economy's scarce resources are allocated by economic planners.

false

An example of market power is a fast food restaurant in a college town.

false

An externality is the impact of a person's actions on that person's well-being.

false

An increase in the number of scholarships issued for college education would increase the supply of education.

false

Approximately 75 percentage of the world's economies experience scarcity

false

Chocolate Chip Cookie Dough ice cream would tend to have very elastic demand because it must be eaten quickly.

false

Demand is elastic if elasticity is less than 1.

false

Demand is said to be elastic if the price of the good responds substantially to changes in demand

false

Demand is unit elastic if elasticity is less than 1.

false


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