Microeconomics Midterm Homework

Suppose, in an effort to prevent the population from​ declining, Italy begins offering new mothers extended periods of paid family leave from work​ and, consequently, the birthrate per woman increases. If​ so, then this could best be characterized as an example of people responding to A. economic incentives. B. envy. C. accounting principles. D. compassion. E. religious beliefs.

A - Economic Incentives

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when A. marginal benefit equals marginal cost. B. marginal benefit is greater than marginal cost. C. marginal cost is zero. D. marginal benefit is maximized.

A - Marginal Benefit equal Marginal Cost

Canada has a market economy. As​ such, Canada's economy​ (relative to centrally planned​ economies) tends to result in A. productive efficiency and allocative efficiency but not necessarily equity. B. allocative efficiency but not necessarily productive efficiency or equity. C. productive efficiency but not necessarily allocative efficiency or equity. D. equity but not necessarily productive efficiency or allocative efficiency. E. allocative efficiency and equity but not necessarily productive efficiency.

A - Productive Efficiency and allocative efficiency but not necessarily equity

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls A. scarcity. B. rationality. C. economics. D. the market.

A - Scarcity

Sunk Costs

A cost that has already been paid and cannot be recovered.

As part of their budget tightening​ process, many states are cutting aid to colleges and​ universities, with students being asked to pick up a bigger part of the escalating tab of higher education. Which of the following would do the most to enable you to cope with those higher expenses without impairing your progress toward a​ degree? A. Reducing your consumption of goods and services not essential to your education.. B. Forming a student lobbying group to protest the budget cuts. C. Taking fewer classes per semester or classes with lower associated expenses. D. Aggressively pursuing​ loans, grants, and benefactors. E. Obtaining a​ part-time job.

A. Reducing your consumption of goods and services not essential to your education..

According to the law of demand there is an inverse relationship between price and quantity demanded. That​ is, the demand curve for goods and services slopes downward.​ Why? A. When the price of a good​ increases, consumers' purchasing power​ falls, and they cannot buy as much of the good as they did prior to the price change. B. When price​ increases, quantity demanded increases. C. When the price of a good​ increases, consumers purchase complementary goods that are now relatively less expensive. D. A and C only.

A. When the price of a good​ increases, consumers' purchasing power​ falls, and they cannot buy as much of the good as they did prior to the price change.

What role does economic research suggest fairness plays in consumer​ choices? Research suggests that fairness plays A. a role because consumers donate money to charity. B. a role only when it is required. C. a role only when it provides a financial benefit. D. a role because it generates network externalities. E. no role because consumers do not tip at restaurants​ they'll never visit again.

A. a role because consumers donate money to charity.

The primary difference between absolute and comparative advantage is A. absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost. B. absolute advantage refers to the ability to produce a good or service at a lower opportunity cost and comparative advantage refers to the ability to produce more of a good or service using the same amount of resources. C. absolute advantage can never change while comparative advantage depends on the relative cost of a​ good's resources. D. absolute advantage is a concept that was utilized in communist countries and comparative advantage is a capitalist idea.

A. absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.

In​ general, the term ​"ceteris paribus​" means A. all else equal. B. holding everything else variable. C. unsettled mathematical paradigms. D. Both A and B

A. all else equal.

An example of the endowment effect is A. being unwilling to sell a painting for a price that is greater than the price you would be willing to pay to buy the painting if you​ didn't already own it. B. being willing to will your descendents a house upon your death that you otherwise could have sold for a substantial price. C. being unwilling to sell a car that you already own. D. taking into account nonmonetary opportunity costs such as the value of your time. E. buying lottery tickets with an expected value that is less than their price.

A. being unwilling to sell a painting for a price that is greater than the price you would be willing to pay to buy the painting if you​ didn't already own it.

Market price is determined by A. Both supply and demand. B. supply only. C. demand only. D. neither supply nor demand.

A. both supply and demand.

What explanations have economists offered for why firms​ don't raise prices when doing so would seem to increase​ profits? Firms might not raise prices when doing so might increase profits because A. consumers find it unfair for firms to increase prices after an increase in demand. B. consumers find it unfair for firms to increase prices after an increase in costs. C. the amount consumers wish to buy is unrelated to how much of the product other people are consuming. D. firms are not concerned about profit in the long run. E. both a and b.

A. consumers find it unfair for firms to increase prices after an increase in demand.

Suppose the price of a complement to LCD televisions rises. What effect will this have on the market equilibrium for LCD​ TVs? The equilibrium price of LCD TVs will A. decrease and the equilibrium quantity will decrease B. decrease and the equilibrium quantity will increase. C. increase and the equilibrium quantity will increase D. increase and the equilibrium quantity will decrease. E. not change and the equilibrium quantity will not change.

A. decrease and the equilibrium quantity will decrease

Suppose gasoline has few close substitutes available. If​ so, then an increase in the price of gasoline will likely A. decrease the quantity of gasoline demanded by a relatively small amount. B. not change the quantity of gasoline demanded. C. increase the quantity of gasoline demanded by a relatively small amount. D. decrease the quantity of gasoline demanded by a relatively large amount. E. increase the quantity of gasoline demanded by a relatively large amount.

A. decrease the quantity of gasoline demanded by a relatively small amount.

Consider firms that introduce new​ products, such as DVDs in 2001. When firms introduce new​ products, how do they typically determine the price elasticity of demand for those​ products? Firms with new products often A. estimate price elasticity of demand by experimenting with different prices. B. guess price elasticity of demand based on market competition. C. identify price elasticity of demand by asking for government assistance. D. approximate price elasticity of demand with market signals such as shortages E. identify price elasticity of demand by using price controls to set price ceilings

A. estimate price elasticity of demand by experimenting with different prices.

Consider the following​ statement: ​"An increase in supply decreases the equilibrium price. The decrease in price increases​ demand." The statement is A. false: decreases in price affect the quantity​ demanded, not demand. B. false: increases in supply decrease price. C. false: increases in supply increase price. Decreases in price increase demand. D. true: increases in supply decrease price. Decreases in price increase demand.

A. false: decreases in price affect the quantity​ demanded, not demand.

In the​ circular-flow diagram showing how a market system​ works, A. income flows to households through factor markets B. income flows to households and the government through product markets C. firms and households are both suppliers in product markets. D. households are demanders and firms are suppliers in factor markets. E. households purchase output produced by firms in product and factor markets.

A. income flows to households through factor markets

The Scottish philosopher Adam Smith argued in 1776 that A. prices would do a better job of coordinating the activities of buyers and sellers than guilds could. B. unions would do a better job of coordinating the activities of buyers and sellers than prices could. C. prices would do a better job of coordinating the activities of buyers and sellers than markets could. D. guilds would do a better job of coordinating the activities of buyers and sellers than prices could.

A. prices would do a better job of coordinating the activities of buyers and sellers than guilds could.

What role does utility play in the economic model of consumer​ behavior? When modeling consumer​ behavior, utility A. reflects the satisfaction a consumer receives from consuming a particular set of goods and services. B. identifies the combination of goods and services that can be produced most efficiently. C. identifies the combination of goods and services that is least expensive. D. provides an objective measure of enjoyment from consuming a particular set of goods and services in units called​ "utils." E. identifies the consumer who receives the most satisfaction from consuming a particular set of goods and services.

A. reflects the satisfaction a consumer receives from consuming a particular set of goods and services.

Prepping for a​ next-day exam over the course of an evening​ (and possibly into the wee hours of test​ day) poses increasing costs since A. the longer you choose to study will result in an increase in the number and value of foregone activities. B. tutors charge higher rates after 7 p.m. C. evenings are a less productive time to study compared to daylight hours. D. studying productivity declines sharply as the effort extends through the evening.

A. the longer you choose to study will result in an increase in the number and value of foregone activities.

According to the law of​ demand, A. there is an inverse relationship between price and quantity demanded. B. when the price of a product​ increases, quantity demanded will increase. C. when the price of a product​ falls, quantity demanded will decrease. D. All of the above.

A. there is an inverse relationship between price and quantity demanded.

Which of the following covers the study of topics such as inflation or​ unemployment? A. Microeconomics B. Macroeconomics C. Both microeconomics and macroeconomics give equal emphasis to these problems. D. None of the above.

B - Macroeconomics

Which of the following is not a step economists follow when developing an economic​ model? A. Revise the model if it fails to explain well the economic data. B. Make value judgments to be proven or disproven. C. Formulate a testable hypothesis. D. Decide on the assumptions to use in developing the model. E. Use economic data to test the hypothesis.

B - Make value judgments to be proven or disproven.

​Trade-offs force society to answer questions such as what goods and services will be​ produced, how will the goods and services be​ produced, and who will receive the goods and services produced. Which of the following countries has an economy where the government makes these​ decisions? A. Canada B. North Korea C. Japan D. The United States

B - North Korea

​Trade-offs force society to make​ choices, particularly when answering the following three fundamental​ questions: A. One, what goods and services will be produced in foreign​ countries? Two, who will produce the goods and​ services? Three, who will receive the goods and services​ produced? B. One, what goods and services will be​ produced? Two, how will the goods and services be​ produced? Three, who will receive the goods and services​ produced? C. One, what goods and services will be​ produced? Two, how will the goods and services be​ produced? Three, is the distribution of goods and services​ fair? D. One, what goods and services will be produced​ domestically? Two, how will the goods and services be​ produced? Three, is the distribution of goods and services​ fair?

B - One, what goods and services will be​ produced? Two, how will the goods and services be​ produced? Three, who will receive the goods and services​ produced?

Equity is A. an exactly equal distribution of income. B. the fair distribution of economic benefits. C. when poorer​ people's income is growing more rapidly than more wealthy​ people's income. D. always achieved by the market.

B - The fair distribution of economic benefits

A perfectly competitive market is a market that meets the conditions of A. (1) many buyers and​ sellers, (2) all firms selling identical​ products, and​ (3) significant barriers to new firms entering the market. B. (1) many buyers and​ sellers, (2) all firms selling identical​ products, and​ (3) no barriers to new firms entering the market. C. (1) many buyers and​ sellers, (2) all firms selling differentiated​ products, and​ (3) no barriers to new firms entering the market. D. (1) few buyers and​ sellers, (2) all firms selling identical​ products, and​ (3) no barriers to new firms entering the market.

B. (1) many buyers and​ sellers, (2) all firms selling identical​ products, and​ (3) no barriers to new firms entering the market.

According to the law of demand there is an inverse relationship between price and quantity demanded. That​ is, the demand curve for goods and services slopes downward.​ Why? A. When price​ increases, demand decreases. B. When the price of a good​ increases, consumers' purchasing power​ decreases, and they cannot buy as much of the good as they did prior to the price change. C. When the price of a good​ increases, consumers purchase complementary goods that are now relatively less expensive. D. When the price of a good​ increases, consumers' purchasing power​ increases, and they can buy more of the good than they did prior to the price change.

B. When the price of a good​ increases, consumers' purchasing power​ decreases, and they cannot buy as much of the good as they did prior to the price change.

If country ABC can produce a unit of good 1 with fewer resources than can country​ XYZ, it is correct to say that country ABC A. will export good 1. B. has an absolute advantage in producing good 1. C. will not wish to trade good 1 with country XYZ. D. has a comparative advantage in producing good 1.

B. has an absolute advantage in producing good 1.

The distinction between substitutes and complements is A. when income​ increases, demand for a complementary good decreases while demand for a substitute good increases. B. substitute goods are used for the same purposes while complementary goods are used together. C. substitute goods are used together while complementary goods are used for the same purposes. D. when income​ increases, demand for a substitute good increases while demand for a complementary good falls.

B. substitute goods are used for the same purposes while complementary goods are used together.

One of the great benefits of trade is A. that it makes it possible for society to become better off by increasing its consumption. B. that it makes it possible for society to become better off by increasing both its production and its consumption. C. that it makes it possible for society to become better off by increasing its production but not its consumption. D. that it provides society what it desires most in life even if it does not enhance the means for achieving its goals.

B. that it makes it possible for society to become better off by increasing both its production and its consumption.

What information must economists have to estimate the price elasticity of​ demand? To estimate the price elasticity of​ demand, economists need to know A. the change in quantity demanded B. the demand curve for a product. C. total revenue. D. the market price and quantity sold. E. the supply curve for a product.

B. the demand curve for a product.

In a free​ market, the actions people take are largely determined by A. the​ "visible hand" of central planning. B. the motivation of financial reward. C. restrictions placed by the government. D. the guild system. E. the motivation of equity.

B. the motivation of financial reward.

The distinction between a normal and an inferior good is A.when income​ increases, demand for a normal good decreases while demand for an inferior good increases. B. when income​ increases, demand for a normal good increases while demand for an inferior good falls. C. normal goods are used for the same purposes while inferior goods are used together. D.normal goods are used together while inferior goods are used for the same purposes.

B. when income​ increases, demand for a normal good increases while demand for an inferior good falls.

A free market exists A. only in fiction. There are no markets or economies which even come close to approaching the status of a free market. B. when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.. C. when the government places absolutely no restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed. D. when the government places significant restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.

B. when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed..

recent​ years, some economists have begun studying situations in which people do not appear to be making choices that are economically rational. This new area of economics is called ?. Why might consumers not act​ rationally? Consumers might A. don't take into account monetary costs. B. fail to ignore sunk costs C. be overly accurate about their future behavior D. take into account nonmonetary opportunity costs. E. only take actions that are appropriate to reach their goals.

Behavioral economics B. fail to ignore sunk costs

A market is a group of ? of a good or service and the institution or arrangement by which they come together to trade.

Buyers and Sellers

Any model is based on making assumptions because A. models have to be simplified to be useful. B. we cannot analyze an economic issue unless we reduce its complexity. C. both a and b. D. neither a nor b.

C - Both A and B

When economists develop models designed to explain the choices people​ make, they generally assume that A. everyone knows everything. B. people make the best decisions. C. people are rational. D. consumers do not act to achieve their goals. E. consumers do not use all available information.

C - People are rational

Which of the following are examples of intellectual​ property? ​(Check all that​ apply.) A. All​ non-natural resources B. Pure air and water C. Books and films D. Ideas for new products or new production techniques E. Software The government seeks to protect intellectual property rights by granting A. patents. B. copyrights. C. franchises. D. All of the above. E. A and B only.

C, D,, E E

A production possibilities frontier​ (PPF) is A. a curve that illustrates the demand of two goods for the average consumer. B. a curve showing the generally attainable combinations of two products that may be produced with all planned or​ potential, yet undeveloped technology. C. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.. D. a curve that shows the potential productive capabilities of the frontier​ (defined as the area outside of​ cities) of a developing economy.

C. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology..

How should sunk costs be used in consumer​ decision-making? In consumer​ decision-making, sunk costs should A. be treated as nonmonetary costs. B. be treated as monetary costs. C. be ignored. D. be treated as opportunity costs. E. be included in the budget constraint.

C. be ignored.

What effect does a network externality have on the market for a​ product? If a network externality is present for a​ product, then A. producers may be less likely to supply the product because it is less unique. B. producers may be less likely to supply the product to avoid switching costs. C. consumers may be more likely to buy the product because it is more useful. D. consumers may be more likely to buy the product to avoid market failure. E. consumers may be more likely to buy the product to create path dependence.

C. consumers may be more likely to buy the product because it is more useful.

Behavioral economist Richard Thaler has studied several examples of how businesses make use of inconsistencies in consumer​ decision-making. Which of the following is an example of​ this? An example of businesses taking advantage of inconsistencies in consumer​ decision-making is A. one​ hotel, such as​ Marriott, attracting customers from another​ hotel, such as Hilton​ Hotels, by advertising that​ Marriott's "add-ons" are more fairly priced than​ Hilton's. B. banks increasing the price of a checking account and removing other costs to consumers such as ATM​ fees, returned check​ charges, and minimum balance fees. C. credit card companies not allowing stores to charge a fee to consumers if they pay with a credit card but allowing stores to provide a discount to consumers if they pay in cash. D. office supply stores requiring consumers to purchase​ "add-ons," such as an ink​ cartridge, at the same time that consumers purchase a​ "base good," such as a printer.

C. credit card companies not allowing stores to charge a fee to consumers if they pay with a credit card but allowing stores to provide a discount to consumers if they pay in cash.

Microeconomics is the study of A. firms as individual units excluding how these firms interact with one another. B. the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth. C. how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices. D. "small" (less than​ $100,000) economic transactions in the economy.

C. how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

The primary difference between product markets and factor markets is that A. product markets are markets for factors of production long dash labor, capital, natural​ resources, and entrepreneurial​ ability, while factor markets are markets for goods and services. B. product markets are generally after factor markets in the distribution chain. C. product markets are markets for​ goods, while factor markets are markets for factors of production - labor, capital, natural​ resources, and entrepreneurial ability. D. product markets produce goods for final sale while the output of factor markets is included in the purchase price of the good itselflong dash factors are not sold.

C. product markets are markets for​ goods, while factor markets are markets for factors of production - labor, capital, natural​ resources, and entrepreneurial ability.

Compare the demand for water with the demand for wine. The demand for wine is likely A. relatively more inelastic because wine is a necessity B.relatively more inelastic because wine is a luxury C. relatively more elastic because wine is a luxury D. relatively more elastic because wine is a necessity E. equally elastic as the demand for water

C. relatively more elastic because wine is a luxury

Macroeconomics is A. the study of how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices. B. the study of​ "large" (greater than​ $100,000) economic transactions in the economy. C. the study of the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth. D. the study of firms as a group with special emphasis on how these firms interact with one another.

C. the study of the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Consider the market for Best Buy computers . The demand for this product would become more elastic if it A. were more of a necessity B. were a smaller share in the consumer's budget C. were defined more narrowly D. had fewer close substitutes. E. were consumed over a shorter period of time.

C. were defined more narrowly

Societies organize their economies in two main ways to answer the three questions of​ what, how, and who. A society can have a ? economy in which the government decides how economic resources will be allocated. Or a society can have a ? economy in which the decisions of households and firms interacting in markets allocate economic resources.

Centrally Planned, Market

The basis for trade is ? advantage.

Comparative

? ​decide(s) what goods and services will be produced.

Consumers, firms, and producers

A hypothesis in an economic model is A. a statement that may be either correct or incorrect about an economic variable. B. usually about a causal relationship. C. tested before it can be accepted​ (or not​ rejected). D. all of the above.

D - All of the above

Economics is a social science because A. it applies the scientific method to the study of the interactions among individuals. B. it is based on studying the actions of individuals. C. it considers human behaviorlong dash particularly ​decision-making behavior. D. all of the above.

D - All of the above

Macroeconomics is most likely to include the study of A. firm interaction .B. consumer choices .C. household choices D. unemployment E. religious decisions.

D - Unemployment

Opportunity cost is A. the idea that because of​ scarcity, producing more of one good or service means producing less of another good or service. B. when consumers and firms use all available information as they act to achieve their goals. C. when unlimited wants exceed the limited resources available to fulfill those wants. D. the highest valued alternative that must be give up to engage in an activity.

D - the highest valued alternative that must be give up to engage in an activity.

According to the law of​ supply, A. there is a positive relationship between price and quantity supplied. B. as the price of a product​ increases, firms will supply less of it to the market. C. as the price of a product​ increases, firms will supply more of it to the market. D. A and C only

D. A and C only

In economic​ terminology, the inputs used to produce output are referred to as A. services B. tangibles C. durables and nondurables. D. factors of production.

D. factors of production.

Consider the supply of crude oil on the world market. In August​ 2011, the price of oil was roughly​ $80 per barrel. Which of the following changes would increase the supply of​ oil? The oil supply curve would shift to the right if A. the prices of other​ petroleum-based products​ (substitutes) were to increase. B. the world price of oil were to increase. C. the number of​ oil-producing countries were to decrease. D. future oil prices were expected to be lower. E. the cost of transporting oil were to increase.

D. future oil prices were expected to be lower.

In​ economics, the term capital refers to A. financial resources used by businesses to hire resources. B. the difference between a​ firm's assets and its liabilities. C. the process of raising funds through the sale of stocks and bonds D. goods used to produce other goods..

D. goods used to produce other goods..

The people of a previously quiet and peaceful country have come to recognize the need to expand and improve their security forces after a wave of terroristic threats and acts. Considering their resource​ limitations, the extent to which security is enhanced will most likely be determined by A. the willingness of those in power to restructure the current security​ apparatus, including the​ dismissal/reassignment of current security leadership. B. the​ public's tolerance of a potentially more intrusive state. C. the availability and expertise of trained​ anti-terror personnel. D. society's willingness to forego other goods and​ services, both public and private.. E. funding availability.

D. society's willingness to forego other goods and​ services, both public and private..

Property rights are A. the rights individuals or firms have to the exclusive use of their property within individual culturally defined norms which are inconsistent in each area of the United States. B. the rights individuals or firms have to the exclusive use of their​ property, excluding the right to buy or sell it. C. the rights government has to the exclusive use of all​ property, including the right to buy or sell it. D. the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it.

D. the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it.

What explanation might an economist provide why some people overeat when such behavior can lead to health​ consequences? Some people likely overeat because A. they accurately estimate the utility from current choices B. they overestimate the future costs of current choices C. they overvalue the utility to be received in the future from being thin D. their preferences are not consistent over time E. they undervalue the utility from current choices.

D. their preferences are not consistent over time

Choco Fantasy is a firm that produces both dark chocolates as well as liquor chocolates. It can produce​ 10,000 bars of dark chocolate per month if all its resources are used to produce only this variety.​ Similarly, using all its resources in the production of liquor​ chocolates, the firm can produce​ 8,000 bars per month.​ However, during a given​ month, the firm produces both varieties. Which of the​ following, if​ true, would suggest that the firm is operating on its​ PPF? A. Medical reports earlier this year indicated that higher chocolate consumption increases the risk of heart attack. B. The opportunity cost of shifting resources from the production of liquor chocolates to dark chocolates is marginal. C. Most domestic consumers prefer the better quality Swiss chocolates imported by the country. D. In an attempt to cut​ costs, the company is planning to fire its unproductive resources. E. Even though the demand for both liquor and dark chocolates has​ increased, the company can increase the production of only one variety.

E. Even though the demand for both liquor and dark chocolates has​ increased, the company can increase the production of only one variety.

Harry Fletcher is a market analyst at an automobile firm. He formed a hypothesis that an increase in advertising would increase demand for the​ firm's cars. The ad campaign ran for a period of six months.​ However, the results were not as positive as Harry had anticipated. Which of the​ following, if​ true, can explain this​ outcome? A. Data reveal substantial growth in consumption demand during this period. B. The firm increased investment in supply chain management. C. The prices of cars have remained stable over the last year. D. The domestic economy grew by 2 percent last year. E. Interest rates increased substantially during this period

E. Interest rates increased substantially during this period

Suppose the equilibrium price and equilibrium quantity of gold both increase . Which of the following would produce such a​ change? A. The market supply curve for gold could have increased. B. The market supply curve for gold could have increased or the market demand curve for gold could have decreased .C. The market demand curve for gold could have decreased D. The market supply curve for gold could have increased or the market demand curve for gold could have increased E. The market demand curve for gold could have increased

E. The market demand curve for gold could have increased

Consumer choices are affected by social influences such as A. product popularity B .whether consumption of a product will make the consumer appear knowledgeable C. fairness. D. celebrity endorsements. E. all of the above.

E. all of the above.

What affects the desirability of a​ product? Products become more desirable when A. professional athletes use a product because consumers who use the same product may feel closer to famous people. B. celebrities use a product because consumers who use the same product may feel more fashionable. C. movie stars use a product because consumers perceive them to be particularly knowledgeable about it. D. both a and b. E. all of the above.

E. all of the above.

Compare the demand for pepper with demand for food . The demand for pepper is likely A. more elastic because pepper tends to be purchased in larger quantities. B. more inelastic because pepper tends to be purchased more frequently. C. more elastic because pepper tends to represent a smaller fraction of a​ consumer's budget. D. more elastic because pepper tends to represent a larger fraction of a​ consumer's budget. E. more inelastic because pepper tends to represent a smaller fraction of a​ consumer's budget.

E. more inelastic because pepper tends to represent a smaller fraction of a​ consumer's budget.

Suppose you have a monthly entertainment budget that you use to rent movies and purchase CDs. You currently use your income to rent 5 movies per month at a cost of​ $5.00 per movie and to purchase 5 CDs per month at a cost of​ $10.00 per CD. Your marginal utility from the fifth movie is 50 and your marginal utility from the fifth CD is 104. Are you maximizing​ utility? You are A. not maximizing utility because the price of movies is not equal to the price of CDs. B. maximizing utility because you are consuming an equal number of movies and CDs. C. not maximizing utility because the marginal utility of movies is not equal to the marginal utility of CDs. D. maximizing utility because you are spending all of your entertainment budget. E. not maximizing utility because the marginal utility per dollar spent on movies is not equal to the marginal utility per dollar spent on CDs.

E. not maximizing utility because the marginal utility per dollar spent on movies is not equal to the marginal utility per dollar spent on CDs.

A freelance​ singer-songwriter is planning the restoration of a recently purchased civil​ war-era farmhouse. While he professes an enjoyment​ of, and talent in the construction​ trades, the theory of comparative advantage implies that A. he should concentrate on the restoration work since his​ out-of-pocket costs will be much lower than if he hires professionals. B. the value of what he imports​ (in this​ case, professional contractor​ services) must equal the value of what he exports​ (songs). C. self-sufficiency is​ advantageous, hence he should split his time between music and construction. D. he ought to do as much of the work himself as possible since imports​ (in this​ case, professional contractor​ services) should always be restricted to those things that cannot be done internally. E. the income lost while away from music will likely exceed the savings realized by doing the work​ himself, thus, he should hire professionals to do the restoration work.

E. the income lost while away from music will likely exceed the savings realized by doing the work​ himself, thus, he should hire professionals to do the restoration work.

How is the price elasticity of demand​ measured? The price elasticity of demand is measured as A. the percentage change in the quantity supplied divided by the percentage change in the quantity demanded B. the change in the quantity demanded divided by the change in price. C. the quantity demanded divided by price D. the slope of the demand curve. E. the percentage change in the quantity demanded divided by the percentage change in price.

E. the percentage change in the quantity demanded divided by the percentage change in price.

Is the study of the choices people make to attain their​ goals, given their scarce resources.

Economics

A(n) ? is someone who operates a​ business, bringing together the factors of productionlong dash ​labor, capital, and natural resourceslong dash to produce goods and services.

Entrepreneur

In the United​ States, who receives the goods and services produced depends largely on

How income is distributed

An accountant increases the price he charges for his services by 14 percent. In​ response, the demand for his services decreases by 6 percent. Will the​ accountant's revenue from his accounting services​ increase, decrease, or remain​ unchanged? The​ accountant's revenue will

Increase

Examining why some economies have grown much faster than others is most likely an issue in

Macroeconomics

A ? economy is an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.

Mixed

Suppose an analyst evaluates whether it is a bad idea to pass minimum wage laws. This is an example of

Normative Analysis

? s concerned with what is​, and ? s concerned with what ought to be. Economics is about ? which measures the costs and benefits of different courses of action.

Positive, Normative, Positive

? occurs when a good or service is produced at the lowest possible cost. ? occurs when production is in accordance with consumer preferences.

Productive Efficiency, Allocative Efficiency

Demand Curve Shifts to the Left: Supply Curve Unchanged:

Q decreases P decreases

Demand Curve Unchanged: Supply Curve Shifts to the Left:

Q decreases P increases

Demand Curve Shifts to the Left: Supply Curve Shifts to the Left:

Q decreases P indeterminant

Demand Curve Unchanged: Supply Curve Shifts to the Right:

Q increases P decreases

Demand Curve Shifts to the Right: Supply Curve Unchanged:

Q increases P increases

Demand Curve Shifts to the Right: Supply Curve Shifts to the Right:

Q increases P indeterminant

Demand Curve Shifts to the Right: Supply Curve Shifts to the Left:

Q indeterminant P increases

Demand Curve Shifts to the Left: Supply Curve Shifts to the Right:

Q indeterminate P decreases

Demand Curve Unchanged: Supply Curve Unchanged:

Q unchanged P unchanged

A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payments by Medicare to nursing homes for​ short-term stays by patients that require therapy or care upon leaving hospitals. Assume the corporation is considering expanding the number of​ "beds" it offers at its nursing homes. Given the changes to​ Medicare, if the marginal benefit of offering an additional bed is ​$6,000 and the marginal cost is ​$4000 per​ bed, then the corporation SHOULD OR SHOULD NOT not offer additional beds.

Should

Marginal Utility

The change in total utilty a person receives from consuming one additional unit of a good or service.

Price elasticity of demand

The responsiveness of the quantity demanded to a change in​ price, measured by dividing the percentage change in the quantity demanded of a product by the percentage change in the​ product's price.

consumers commonly commit the following three mistakes when making decisions​:

They take into account monetary costs but ignore nonmonetary opportunity costs. They fail to ignore sunk costs. They are overly optimistic about their future behavior.

Two key groups participate in markets. A ? consists of all the individuals in a home. ? are suppliers of goods and services. We can use a simple economic model called the ? to see how participants in markets are linked.

household, firms, circular-flow diagram

Suppose the price elasticity of demand for cereal is negative 0.82 If​ so, then the demand for cereal is inelastic or elastic? . In another​ example, assume the price elasticity of demand for a particular magazine is negative 1.24 . The demand for the magazine is elastic or inelastic

inelastic, elastic

Utility

the enjoyment or satisfaction people receive from consuming goods and services.

endowment effect

the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn't already own it.