Study questions
What is the law of supply
The quantity supplied is usually related to its price The lower the price the smaller the quantity
Many households supplement their food budget by cultivating small vegetable gardens. Explain how each of the following might influence this kind of household production: Both husband and wife are professionals who earn high salaries. The household is located in a city rather than in a rural area. The household is located in a region where there is a high sales tax on food purchases. The household is located in a region that has a high property tax rate.
- too busy, so likely not making a garden B- Land too expensive, no c more likely to plant a garden, food cost in store is expensive D yes if land is farm and causing the price of food to rise, no if the property tax deals with their garden.
If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is a. a normal good. b. none of these answers. c. an inferior good. d. a substitute good. e. a complementary good.
. an inferior good.
A perfectly competitive market has a. firms that set their own prices. b. only one seller. c. at least a few sellers. d. many buyers and sellers. e. none of these answers.
. many buyers and sellers.
Income - Taxes 1000 200 2000 350 3000 450 What percentage of income is paid in taxes at each level? Is the tax rate progressive, proportional, or regressive? What is the marginal tax rate on the first $1,000 of income? The second $1,000? The third $1,000?
20% 17.5 15% B- regressive C-20%, (200/1000 = .20) 15%(350/1000= .35 -.20 = .15) 10%(450/1000=.45 - .35= .10)
(Opportunity Cost) You can spend spring break either working at home for $80 per day for five days or go to Florida for the week. If you stay home, your expenses will total about $100. If you go to Florida, the airfare, hotel, food, and miscellaneous expenses will total about $700. What's your opportunity cost of going to Florida?
700/300 700 for trip to florida 400 gained from working but 100 in expenses
Productivity can be increased by a. improving the education of workers. b. raising union wages. c. raising minimum wages. d. restricting trade with foreign countries.
A
Determine whether each of the following would increase or decrease the opportunity costs for mothers who decide not to work outside the home. Explain your answers. Higher levels of education for women Higher unemployment rates for women Higher average pay levels for women Lower demand for labor in industries that traditionally employ women
A Increases B Decreases C Increases D Decreases
What cause the change in quantity demanded or supply?
A change in cost
What will cause the change in equilibrium price?
A change in demand or supply
What could change the equilibrium price?
A change in demand will cause equilibrium price and output to change in thesame direction. a. A decrease in demand will cause a reduction in the equilibrium price and quantity of a good
Which of the following is an example of a resource market? The real estate market The market for action movies A market for musical instruments A job market
A job market
In making which of the following statements is an economist acting more like a scientist? a. A reduction in unemployment benefits will reduce the unemployment rate. b. The rate of inflation should be reduced because it robs the elderly of their savings. c. The unemployment rate should be reduced because unemployment robs individuals of their dignity. d. The state should increase subsidies to universities because the future of our country depends on education.
A reduction in unemployment benefits will reduce the unemployment rate.
_____ is the ability to make something using fewer resources than other producers use.
Absolute advantage
Which of the following issues is related to microeconomics? a. the impact of oil prices on car production b. the impact of money on inflation c. the impact of technology on economic growth d. the impact of the deficit on saving
Ahe impact of oil prices on car production
_____ can predict the impact of an economic event on economic choices. An economic variable Positive economics An economic theory Normative economics
An economic theory
Which of the following involve a trade-off? a. Taking a nap b. All of these answers involve trade-offs. c. Watching a football game on Saturday afternoon d. Going to university e. Buying a new car
B
Which of the following comes under the purview of microeconomics? An increase in the price of a good due to a sudden increase in its quantity demanded A decrease in the capital account deficit of a country An increase in the value of net exports of a country A change in the rate of exchange of a country's currency in the foreign exchange market
An increase in the price of a good due to a sudden increase in its quantity demanded
Why does a supply curve slope upward
As price increases, producers produce more of that good
Why does demand curve slope downward
As the price becomes higher, the demand becomes less
What factors does a householder consider when deciding whether to produce a good or service at home versus buy it in the marketplace?
Availability or resources requirement ofskilled labor to produce a good or service it should compare the tranasction cost/opportunity cost a household should assess the market size and competition level for product before product
. Suppose you find €20. If you choose to use the €20 to go to a football match, your opportunity cost of going to the game is a. nothing, because you found the money. b. €20 (because you could have used the €20 to buy other things) plus the value of your time spent at the game. c. €20 (because you could have used the €20 to buy other things) plus the value of your time spent at the game, plus the cost of the dinner you purchased at the game. d. €20 (because you could have used the €20 to buy other things). e. none of these answers
B
. Which of the following statements is true about a market economy? a. With a large enough computer, central planners could guide production more efficiently than markets. b. Market participants act as if guided by an invisible hand to produce outcomes that maximize social welfare. c. The strength of a market system is that it tends to distribute resources evenly across consumers. d. Taxes help prices communicate costs and benefits to producers and consumers.
B
Since people respond to incentives, we would expect that, if the average salary of accountants increases by 50% while the average salary of teachers increases by 20%, then a. fewer students will take degree courses in accounting and more will take education courses. b. fewer students will take degree courses in education and more will take accounting courses. c. fewer students will attend university. d. none of these answers.
B
_____ exists in production when there is no way resources can be reallocated to increase the production of one good without decreasing the production of another.
Efficiency
A rational person does not act unless a. the action is ethical. b. the action produces marginal costs that exceed marginal benefits. c. the action produces marginal benefits that exceed marginal costs. d. the action makes money for the person. e. none of these answers.
C
An increase in the price of beef provides information which a. provides no information because prices in a market system are managed by planning boards. b. tells consumers to buy less pork. c. tells producers to produce more beef. d. tells consumers to buy more beef.
C
Economics is the study of a. how society manages its unlimited resources. b. how to reduce our wants until we are satisfied. c. how society manages its scarce resources. d. how to fully satisfy our unlimited wants. e. how to avoid having to make trade-offs.
C
High and persistent inflation is caused by a. unions increasing wages too much. b. OPEC raising the price of oil too much. c. governments increasing the quantity of money too much. d. regulations raising the cost of production too much.
C
Which of the following products would be least capable of producing an externality? a. inoculations against disease b. cigarettes c. food d. education e. stereo equipment
C
Which of the following situations describes the greatest market power? a. Subaru's impact on the price of cars b. a farmer's impact on the price of corn c. Microsoft's impact on the price of desktop operating systems d. a student's impact on college tuition
C
5 things that can shift a demand curve left or right
Consumer income Price of other goods Consumer expectations Consumer taste Number of consumers
Foreign trade a. none of these answers. b. increases the scarcity of resources. c. makes a country more equitable. d. allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home. e. allows a country to avoid trade-offs.
D
Which of the following activities is most likely to produce an externality? a. A student eats a hamburger in the student union. b. A student reads a novel for pleasure. c. A student sits at home and watches T.V. d. A student has a party in her room in the student hall of residence.
D
Which of the following is not part of the opportunity cost of going on holiday? a. the money you spent on a theatre show b. the money you could have made if you had stayed at home and worked c. the money you spent on airline tickets d. the money you spent on food
D
Which of the following will not shift a country's production possibilities frontier outward? a. an advance in technology b. an increase in the labour force c. an increase in the capital stock d. a reduction in unemployment
D
18. Which of the following statements regarding the circular-flow diagram is true? a. If Susan works for BAe Systems and receives a salary payment, the transaction takes place in the market for goods and services. b. If BAe Systems sells a military aircraft, the transaction takes place in the market for factors of production. c. None of these answers. d. The factors of production are owned by households. e. The factors of production are owned by firms.
D the factors of production are owned by households.
Raising taxes and increasing welfare payments a. reduces market power. b. proves that there is such a thing as a free lunch. c. improves efficiency at the expense of equity. d. none of these answers e. improves equity at the expense of efficiency.
E
Trade-offs are required because wants are unlimited and resources are a. economical. b. unlimited. c. efficient. d. marginal. e. scarce.
E
workers in Western Europe enjoy a high standard of living because a. the countries of Western Europe have set high minimum wage rates. b. unions in Western Europe keep the wage high. c. none of these answers. d. the countries of Western Europe have protected their industries from foreign competition. e. workers in the United States are highly productive.
E
. Most economists believe that tariffs and import quotas usually reduce general economic welfare
T
. A perfectly competitive market consists of products that are all slightly different from one another.
F
. If apples and oranges are substitutes, an increase in the price of apples will decrease the demand for oranges.
F
An increase in the price of steel will shift the supply of cars to the right.
F
If there is a shortage of a good, then the price of that good tends to fall.
F
If there is an increase in supply accompanied by a decrease in demand for coffee, then there will be a decrease in both the equilibrium price and quantity in the market for coffee.
F
Macroeconomics is concerned with the study of how households and firms make decisions and how they interact in specific markets.
F
Normative statements can be refuted with evidence.
F
Points outside the production possibilities frontier are attainable but inefficient.
F
T/F High and persistent inflation is caused by excessive growth in the quantity of money in the economy.
F
T/F An individual farmer is likely to have market power in the market for wheat.
F
T/F In the short run, a reduction in inflation tends to cause a reduction in unemployment.
F
T/F When the government redistributes income with taxes and welfare, the economy becomes more efficient.
F
T/f Adam Smith's "invisible hand" concept describes how corporate business reaches into the pockets of consumers like an "invisible hand.
F
T/f A car manufacturer should continue to produce additional cars as long as the firm is profitable, even if the cost of the additional units exceeds the price received.
F
T?F The European Union will benefit economically if we eliminate trade with Asian countries because its citizens will be forced to produce more of their own cars and clothes.
F
T?F A tax on alcoholic drinks raises the price of alcoholic drinks and provides an incentive for consumers to drink more.
F
The law of demand states that an increase in the price of a good decreases the demand for that good.
F
When the price of a good is below the equilibrium price, it causes a surplus.
F
t/f Workers in the countries of Western Europe have a relatively high standard of living because those countries have relatively high minimum wage rates.
F
To predict the effect of an economic event on economic choices, economic theories _____. focus on the average behavior of people in groups analyze the behavior of every member in a group concentrate on products market and not services ignore marginal analysis of an action
Focus on the average behavior of people in groups Correct. To predict the effects of an economic event on economic choices, economists focus on the average behavior of people in groups. See 1-3: The Science of Economic AnalysisThe Science of Economic Analysis
. The market supply curve is the horizontal summation of the individual supply curves.
T
An advance in the technology employed to manufacture roller blades will result in a decrease in the equilibrium price and an increase in the equilibrium quantity in the market for roller blades.
T
Which of the following is true? If the quantity demanded of a good changes with a change in the price of the good, quantity demanded is a dependent variable. Two variables have a positive relation when one increases as the other decreases and vice versa. Two variables are said to be independent when one variable decreases as the other decreases. If the quantity supplied of a good changes with a change in the price of the good, quantity supplied is an independent variable.
If the quantity demanded of a good changes with a change in the price of the good, quantity demanded is a dependent variable.
EXIT Which of the following is a drawback of a pure command economy? In a command economy, nobody in particular owns resources, therefore each person has less incentive to employ them in their highest-valued use, so some resources are wasted. The production or consumption of some goods involves side effects that can either harm or benefit people not involved in the production or consumption of these goods. People with no resources to sell could starve in a command economy. Some producers may try to monopolize markets by eliminating competition
In a command economy, nobody in particular owns resources, therefore each person has less incentive to employ them in their highest-valued use, so some resources are wasted.
Which of the following is an advantage of specialization of laborers? It increases the cost of production by increasing the training cost of a firm. It provides equal opportunity of growth to both skilled and unskilled laborers. It allows workers to develop more experience at a particular task.
It allows workers to develop more experience at a particular task.
Identify a feature of an economic theory. It is based on unrealistic assumptions. It contains every minute detail of the problem under consideration. It cannot be corroborated by facts and data. It does not spell out every detail and interrelation.
It does not spell out every detail and interrelation.
Which of the following is an example of the fallacy that association is causation? The quality of rented apartments declined in Baltonia as a result of the rent controls imposed by the Baltonian government. Jolynn observes that whenever she waters her plants, it rains. She concludes that watering the plants is causing the precipitation. The dean of a school rates the quality of the school professors by taking into consideration the feedback from just one class. The Baltonian government assumed that the maximum contribution to GDP came from economic graduates in 2014. It based its conclusion on the fact that most of the students graduated in Economics and the best-paid jobs were offered to the Economics graduates in 2014.
Jolynn observes that whenever she waters her plants, it rains. She concludes that watering the plants is causing the precipitation.
If an increase in the price of a good results in an increase in the quantity supplied of Good X, the variables price and quantity supplied are said to be _____. infinitely related inversely related positively related unrelated
Positively related Correct. If an increase in the price of a good results in an increase in the quantity supplied of Good X, the variables price and quantity supplied are said to be positively related. See A1-1 Understanding GraphsUnderstanding Graphs
What is a price ceiling?
Price set by the government, maximum set, below equilibrium
An oligopolistic market has only a few sellers.
T
Suppose a frost destroys much of the Florida orange crop. At the same time, suppose consumer tastes shift toward orange juice. What would we expect to happen to the equilibrium price and quantity in the market for orange juice? a. Price will decrease; quantity is ambiguous. b. The impact on both price and quantity is ambiguous. c. Price will increase; quantity will increase. d. Price will increase; quantity will decrease. e. Price will increase; quantity is ambiguous.
Price will increase; quantity is ambiguous.
Which of the following is a feature of a mixed economy? The barter system as a means of exchange Private ownership of some resources and public ownership of other resources No well-defined property rights Public ownership of resources and centralized planning
Private ownership of some resources and public ownership of other resources
alph and Sue perform two tasks: making soccer balls and sewing cotton shirts. With the given resources, Ralph can make 20 soccer balls or sew 6 shirts and Sue can make 16 balls or sew 10 shirts. Which of the following is true? Sue should specialize in the production of soccer balls. Ralph has an absolute advantage in the production of shirts. Ralph should specialize in the production of soccer balls.
Ralph should specialize in the production of soccer balls.
Why is the concept of scarcity important to the definition of economics?
Scarcity forces us to choose to pass up on some goods and services. Without scarcity there would be no economic problem and no need for prices
Which of the following is a possible drawback of pure capitalism? The protection of property rights and enforcement of contracts is controlled by a central authority and not a private entity. People with abundant resources are compelled to share their resources with those who have no resources. Some producers may try to monopolize markets by eliminating competition. Public goods are produced by private firms and are sold at high prices.
Some producers may try to monopolize markets by eliminating competition.
Identify five things that can shift a supply curve left or right
State of technology Resource prices Price of other goods Producer expectations Number of producers
What shifts a supply curve
State of technology Resource prices Price of other goods Producer expectations Number of producers
In a shorefront tourist town, a hurricane washes away the beach: Does the supply curve for the hotel rooms shift to the left, right or remain same? Does the demand curve shift? After the hurricane, what will happen to the equilibrium price and quantity of hotel rooms? Suppose the neighboring town still has its beaches, after the hurricane what happens in that town?
Stay the same Shift to the left The price will go down (because the demand is going down) The market will go down in the town with the hurricane but the neighboring town will increase the price
If Coke and Pepsi are substitutes, an increase in the price of Coke will cause an increase in the equilibrium price and quantity in the market for Pepsi.
T
If an economy is operating on its production possibilities frontier, it must be using its resources efficiently.
T
If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another.
T
If an economy were experiencing substantial unemployment, the economy is producing inside the production possibilities frontier.
T
If consumers expect the price of shoes to rise, there will be an increase in the demand for shoes today.
T
If pencils and paper are complements, an increase in the price of pencils causes the demand for paper to decrease or shift to the left.
T
T/F Sue is better at cleaning and Bob is better at cooking. It will take fewer hours to eat and clean if Bob specializes in cooking and Sue specializes in cleaning than if they share the household duties evenly
T
T/F An unintended consequence of public support for higher education is that low tuition provides an incentive for many people to attend state universities even if they have no desire to learn anything.
T
T/F When a jet flies overhead, the noise it generates is an externality.
T
T/F When economists say, "There is no such thing as a free lunch," they mean that all economic decisions involve trade-offs.
T
T?F To a student, the opportunity cost of going to a football match would include the price of the ticket and the value of the time that could have been spent studying.
T
The law of supply states that an increase in the price of a good increases the quantity supplied of that good.
T
When economists make positive statements, they are more likely to be acting as scientists.
T
When people act as scientists, they must try to be objective.
T
t/f Rational people act only when the marginal benefit of the action exceeds the marginal cost.
T
Which of the following is the best description of the production possibilities frontier (PPF)? The PPF is a curve showing the changes in output of a good or service brought about by changes in input usage. The PPF is a curve showing the different input combinations used to produce a particular good or service. The PPF is a curve showing alternative combinations of goods that can be produced when available resources are used efficiently.
The PPF is a curve showing alternative combinations of goods that can be produced when available resources are used efficiently.
Which of the following statements is true? One of the drawbacks of a pure command economy is that people with no resources to sell could starve in a command economy. The United States represents a mixed system, with government directly accounting for a little more than one-third of all economic activity. The United States represents a pure command system, with government directly accounting for a little more than one-half of all economic activity. A mixed economy is characterized by the barter system as a means of exchange.
The United States represents a mixed system, with government directly accounting for a little more than one-third of all economic activity.
Which of the following is a normative economic statement? If the price of Pepsi increases, then the quantity demanded decreases. The U.S. unemployment rate is 9.7 percent. A ceiling on rents reduces the quantity and quality of housing available. The distribution of income in the United States should be more equal. CONTINUE
The distribution of income in the United States should be more equal. Correct. The distribution of income in the U.S. should be more equal is a normative economic statement. See 1-3: The Science of Economic AnalysisThe Science of Economic Analysis
Which of the following statements is true about the impact of an increase in the price of lettuce? a. Both the demand for lettuce will decrease and the equilibrium price and quantity of salad dressing will fall. b. The supply of lettuce will decrease. c. The demand for lettuce will decrease. d. The equilibrium price and quantity of salad dressing will fall. e. The equilibrium price and quantity of salad dressing will rise.
The equilibrium price and quantity of salad dressing will fall.
What is price floor?
The lowest price that a government can set on a good, above equilibrium
Which of the following statements about microeconomics and macroeconomics is not true? a. The study of very large industries is a topic within macroeconomics. b. Macroeconomics is concerned with economy-wide phenomena. c. Microeconomics is a building block for macroeconomics. d. Microeconomics and macroeconomics cannot be entirely separated.
The study of very large industries is a topic within macroeconomics.
Which of the following statements is normative? a. Large government deficits cause an economy to grow more slowly. b. People work harder if the wage is higher. c. The unemployment rate should be lower. d. Printing too much money causes inflation.
The unemployment rate should be lower.
Suppose an economy produces food and clothing, and a technological innovation occurs that enhances the productivity of resources used in producing both goods. Which of the following would be consistent with this situation? The PPF rotates outward along the clothing axis and remains fixed at the point of maximum food production. There is a parallel inward shift of the PPF. The PPF rotates outward along the food axis and remains fixed at the point of maximum cloth production. There is a parallel outward shift of the PPF.
There is a parallel outward shift of the PPF.
Suppose consumer tastes shift toward the consumption of apples. Which of the following statements is an accurate description of the impact of this event on the market for apples? a. There is an increase in the quantity demanded of apples and in the supply for apples. b. There is an increase in the demand and supply of apples. c. There is an increase in the demand for apples and a decrease in the supply of apples. d. There is a decrease in the quantity demanded of apples and an increase in the supply for apples. e. There is an increase in the demand for apples and an increase in the quantity supplied of apples.
There is an increase in the demand for apples and an increase in the quantity supplied of apples.
Which of the following is a fundamental question that an economic system must answer? What types of incentives guide economic decision makers? What process is used to allocate resources? Who owns the resources? What goods and services are to be produced?
What goods and services are to be produced
Which of the following are the three fundamental economic questions? What to produce, when to produce, and for whom to produce? What to produce, how to produce, and for whom to produce? What time to produce, what place to produce, and how to produce? What to produce, when to produce, and where to produce?
What to produce, how to produce, and for whom to produce?
What determines whether or not a resource is scarce?
When it is not freely available
Why is a firm willing to and able to increase the quantity supplied as the product price increases
Willing shows that a signal to existing and potential suppliers about the rewards Marginal cost of production increases as output increases
Suppose, in an hour, you can either make 20 tortillas or word-process 5 pages of text and your roommate can either make 15 tortillas or word-process 15 pages of text. Which of the following is correct? You have an absolute advantage in both tasks. Your roommate's comparative advantage is in making tortillas. Your roommate has an absolute advantage in both tasks. Your comparative advantage is in making tortillas.
Your comparative advantage is in making tortillas.
Which of the following shifts the demand for watches to the right? a. an increase in the price of watches b. none of these answers c. a decrease in the price of watch batteries if watch batteries and watches are complements d. a decrease in consumer incomes if watches are a normal good e. a decrease in the price of watches
a decrease in the price of watch batteries if watch batteries and watches are complements
A summer in Miami turned out to be warmer than usual, causing people to consume more cola. This can be represented by: a rightward shift of the demand curve for cola. a downward movement along the demand curve for cola. a leftward shift of the demand curve for cola. an upward movement along the demand curve for cola.
a rightward shift of the demand curve for cola.
As personal income increases, consumers are willing and able to buy more of a good at each price. This causes: a rightward shift of the demand curve. an upward movement along the demand curve. a leftward shift of the demand curve. a downward movement along the demand curve.
a rightward shift of the demand curve.
Economic growth is depicted by a. a shift in the production possibilities frontier outward. b. a movement from inside the curve toward the curve. c. a shift in the production possibilities frontier inward. d. a movement along a production possibilities frontier toward capital goods.
a shift in the production possibilities frontier outward.
Complete each of the following sentences: Goods that are nonrival and nonexcludable are known as. are cash or in-kind benefits given to individuals as outright grants from the government. A(n)confers an external benefit on third parties that are not directly involved in the market transaction. refers to the government's pursuit of full employment and price stability through variations in taxes and government spending.
a-market failure B-public goods c-transfer payments d-positive externality e-monetary policy
A decrease (leftward shift) in the supply for a good will tend to cause a. an increase in the equilibrium price and quantity. b. a decrease in the equilibrium price and an increase in the equilibrium quantity. c. none of these answers. d. a decrease in the equilibrium price and quantity. e. an increase in the equilibrium price and a decrease in the equilibrium quantity.
an increase in the equilibrium price and a decrease in the equilibrium quantity.
An increase (rightward shift) in the demand for a good will tend to cause a. an increase in the equilibrium price and quantity. b. none of these answers. c. an increase in the equilibrium price and a decrease in the equilibrium quantity. d. a decrease in the equilibrium price and an increase in the equilibrium quantity. e. a decrease in the equilibrium price and quantity.
an increase in the equilibrium price and quantity.
All of the following shift the supply of watches to the right except a. an advance in the technology used to manufacture watches. b. an increase in the price of watches. c. All of these answers cause an increase in the supply of watches. d. a decrease in the wage of workers employed to manufacture watches. e. manufacturers' expectation of lower watch prices in the future.
an increase in the price of watches.
A decrease in the price of cocoa will most likely lead to: a decrease in the supply of chocolate an increase in the supply of chocolate an increase in the demand for chocolate a decrease in the demand for chocolate
an increase in the supply of chocolate
Economic models are a. usually made of wood and plastic. b. built with assumptions. c. useless if they are simple. d. created to duplicate reality.
b. built with assumptions.
(Sunk Cost and Choice) Suppose you go to a restaurant and buy an expensive meal. Halfway through, despite feeling quite full, you decide to clean your plate. After all, you think, you paid for the meal, so you are going to eat all of it. What's wrong with this thinking?
basically your money is already gone, and it should not factor into you choice when deciding if you should finish
In which of the following cases is the assumption most reasonable? a. To address the impact of taxes on income distribution, an economist assumes that everyone earns the same income. b. To address the impact of money growth on inflation, an economist assumes that money is strictly coins. c. To model the benefits of trade, an economist assumes that there are two people and two goods. d. To estimate the speed at which a beach ball falls, a physicist assumes that it falls in a vacuum.
c. To model the benefits of trade, an economist assumes that there are two people and two goods.
Positive economic statements: can be proved or disproved by reference to facts. represent opinions that are subjective in nature. predict average group behavior and not individual behavior. cannot be proved or disproved by reference to facts.
can be proved or disproved by reference to facts.
. Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for wheat today? a. The impact on both price and quantity is ambiguous. b. Price will decrease; quantity is ambiguous. c. Price will increase; quantity will decrease. d. Price will increase; quantity is ambiguous. e. Price will increase; quantity will increase.
d. Price will increase; quantity is ambiguous.
Points on the production possibilities frontier are a. inefficient. b. normative. c. unattainable. d. efficient. e. none of these answers
d. efficient.
The law of demand states that an increase in the price of a good a. increases the supply of that good. b. decreases the quantity demanded for that good. c. decreases the demand for that good. d. increases the quantity supplied of that good. e. none of these answers.
decreases the quantity demanded for that good.
An inferior good is one for which an increase in income causes a(n) a. decrease in supply. b. increase in demand. c. increase in supply. d. decrease in demand.
decrease in demand.
Discuss the impact of rational self-interest on each of the following decisions: Whether to attend college full time or enter the workforce full time Whether to buy a new textbook or a used one Whether to attend a local college or an out-of-town college
describe the cost vs benefit
The economics profession thrives because: economic models help to explain complicated scenarios in a better way than other alternative approaches. economists always agree on solutions to economic problems and have helped solve all major global financial crises. students with economics majors get better jobs and better compensation benefits than any other discipline. economists use complicated mathematical models to explain economic events.
economic models help to explain complicated scenarios in a better way than other alternative approaches.
Economic models must mirror reality or they are of no value.
f
It is reasonable to assume that the world is composed of only one person when modelling international trade.
f
The production possibilities frontier is bowed outward because the trade-offs between the production of any two goods are constant.
f
the statement, "An increase in inflation tends to cause unemployment to fall in the short run," is normative.
f
In economic analysis, what are the assumed objectives of households, firms, and the government?
households- miximize their utility get the goods at cheaper price Firms- maximize profit Attract more customers with resonable prices provide products that involve less cost government maximize welfare of state protect the health of the citizens see that the product are good in quality for consumption
One of the key criteria used to distinguish among different economic systems is: how allocation decisions are made. when allocation decisions are made. where allocation decisions are made. what allocation decisions are made.
how allocation decisions are made.
If consumers expect the price of gasoline to increase tomorrow, the demand for gasoline is likely to _____ today. decline substantially be zero increase remain unchanged
increase
The law of supply states that an increase in the price of a good a. none of these answers. b. increases the quantity supplied of that good. c. increases the supply of that good. d. decreases the demand for that good. e. decreases the quantity demanded for that good.
increases the quantity supplied of that good.
An economic theory is characterized as a good theory if: it is supported by renowned economists. it helps in sorting and understanding information. it is based on mathematical calculations. it benefits all members of society simultaneously.
it helps in sorting and understanding information.
A good is said to be scarce when: consumers do not have to give up the consumption of another good to consume this good. consumers consume less of this good as their income increases. its consumption increases as its price increases. it is not freely available and its price exceeds zero.
it is not freely available and its price exceeds zero.
When you specialize in a task that you do best, you are applying the:
law of comparative advantage.
What is comparative advantage
make something at a lower opportunity cost
What is absolute advantage
make something with fewer resources Example: US wheat =1 UK wheat = 2 US has absolute advantage
Which of the following is not a factor of production? a. labour b. land c. money d. capital e. All of these answers are factors of production.
money
A monopolistic market has a. many buyers and sellers. b. none of these answers. c. firms that are price takers. d. only one seller. e. at least a few sellers.
only one seller.
One of the main assumptions in economics is that: people are rational. people are altruist by nature. each individual tries to maximize the other individual's marginal cost. each individual tries to minimize the other individual's marginal benefit.
people are rational. Correct. One of the main assumptions in economics is that people are rational and they try to make the best choices they can, given the available time and informatio
The production possibilities frontier shows: possible combinations of two types of goods that can be produced when all available resources are fully and efficiently employed. possible combinations of two types of resources that can be used to produce a given combination of two goods. the possible quantity of a good that will be supplied at various possible prices. the possible quantity of a good that will be consumed at various possible prices.
possible combinations of two types of goods that can be produced when all available resources are fully and efficiently employed.
An increase in supply means that: producers are willing to sell more at each price. the supply curve has shifted leftward. there is a downward movement along the supply curve. there is an upward movement along the supply curve.
producers are willing to sell more at each price.
A _____ is an economic system characterized by the private ownership of resources.
pure capitalist system
The Sanders visited a number of car showrooms in their city and read a lot of reviews in journals and online before deciding on a car. This shows that: rational individuals may invest a lot of time and collect information before making a decision. unlimited human wants cannot be satisfied by limited resources. people are never satisfied with what they have and always want more. people compare the marginal cost and the marginal benefit before making a decision.
rational individuals may invest a lot of time and collect information before making a decision.
Two variables that move in opposite directions are: called independent variables. said to be inversely related. said to have zero correlation. said to have a positive correlation.
said to be inversely related.
The economic problem of _____ arises because human wants and desires are unlimited and the means to satisfy these wants are limited. unemployment inflation recession scarcity
scarcity
A yearly performance appraisal rewarded an employee with a 25 percent hike in the salary. This can: result in a downward movement along the demand curve. shift the demand curve rightward. result in an upward movement along the demand curve. shift the supply curve leftward.
shift the demand curve rightward.
An increase in the proportion of teenagers in the total population of a country is likely to: shift the market demand curve of pizza leftward. result in an upward movement along the market demand curve for pizza. shift the market demand curve for pizza rightward. result in an downward movement along the market demand curve for pizza.
shift the market demand curve for pizza rightward.
demand curve
shift to the right, price goes up shift to the left price goes down
Supply curve
shift to the right, supply increases, shift to the left, supply decreases
Positive statements are a. macroeconomic. b. microeconomic. c. statements of description that can be tested. d. statements of prescription that involve value judgments.
statements of description that can be tested.
If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are a. complements. b. inferior goods. c. normal goods. d. none of these answers. e. substitutes.
substitutes.
Economic decision makers should ignore _____ while making choices. marginal costs sunk costs opportunity costs average costs
sunk cost
An advance in production technology would cause the production possibilities curve to shift outward.
t
Assumptions make the world easier to understand because they simplify reality and focus our attention.
t
What are the sources of government revenue in the United States? Which types of taxes are most important at each level of government? Which two taxes provide the most revenue to the federal government?
taxes-user charges(toll roads) Fed-individual income tax, State- income and sales taxes, local gov- property tax C- personal taxes and payroll taxes
Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect a. the equilibrium quantity to rise and the equilibrium price to rise. b. the equilibrium quantity to rise and the equilibrium price to fall. c. the equilibrium quantity to rise and the equilibrium price to remain constant. d. the change in the equilibrium quantity to be ambiguous and the equilibrium price to rise. e. the equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.
the equilibrium quantity to rise and the change in the equilibrium price to be ambiguous
Suppose there is an increase in both the supply and demand for personal computers. Further, suppose the supply of personal computers increases more than demand for personal computers. In the market for personal computers, we would expect a. the change in the equilibrium quantity to be ambiguous and the equilibrium price to fall. b. the equilibrium quantity to rise and the equilibrium price to rise. c. the equilibrium quantity to rise and the change in the equilibrium price to be ambiguous. d. the equilibrium quantity to rise and the equilibrium price to fall. e. the equilibrium quantity to rise and the equilibrium price to remain constant.
the equilibrium quantity to rise and the equilibrium price to fall.
The law of supply states that: the price and quantity supplied of a product are inversely related. an increase in demand for a product will cause a leftward shift in the supply curve. a shift in the supply curve of a product must be the result of a change in prices. the price and quantity supplied of a product are positively related.
the price and quantity supplied of a product are positively related.
Division of labor refers to: the process of breaking down the production of a good into separate tasks. the free movement of workers across departments in a business. the discrimination between a unionized worker and a non-unionized worker. the use of modern machinery and labor force in the production of a commodity.
the process of breaking down the production of a good into separate tasks.
Division of labor refers to: the use of modern machinery and labor force in the production of a commodity. the discrimination between a unionized worker and a non-unionized worker. the process of breaking down the production of a good into separate tasks. the free movement of workers across departments in a business.
the process of breaking down the production of a good into separate tasks.
When a market is in equilibrium, _____. there is excess supply in the market the quantity demanded exceeds the quantity supplied there is a downward pressure on the price the quantity demanded is equal to the quantity supplied
the quantity demanded is equal to the quantity supplied
If the price of a good is equal to the equilibrium price, a. there is a shortage and the price will fall. b. the quantity demanded is equal to the quantity supplied and the price remains unchanged. c. there is a surplus and the price will rise. d. there is a shortage and the price will rise. e. there is a surplus and the price will fall.
the quantity demanded is equal to the quantity supplied and the price remains unchanged.
What is opportunity cost and how does it relate to cost
the value of the best alternative that is forgone (Opportunity lost) It is subjective x1/x2 Wheat in UK =1 Corn in Uk = 2 Opportunity cost of wheat is 1/2
Amanda can choose between two alternatives after high school. She can either attend a university or work at her father's grocery store. Amanda will have to pay $9,000 for tuition and fees to enroll in the university. However, if she decides to work at the grocery store, she will earn $500 per week. If Amanda decides to go to college, the opportunity cost of her decision will be:
the weekly wage of $500 she could have earned if she had decided to work at the grocery store.
If the price of a good is below the equilibrium price, a. there is a shortage and the price will rise. b. the quantity demanded is equal to the quantity supplied and the price remains unchanged. c. there is a shortage and the price will fall. d. there is a surplus and the price will rise. e. there is a surplus and the price will fall.
there is a shortage and the price will rise.
If the price of a good is above the equilibrium price, a. there is a surplus and the price will rise. b. there is a shortage and the price will fall. c. there is a shortage and the price will rise. d. the quantity demanded is equal to the quantity supplied and the price remains unchanged. e. there is a surplus and the price will fall.
there is a surplus and the price will fall.
If the prices of all goods changed by the same percentage, _____. there would be a leftward shift of the market supply curve there would be rightward shift of the market demand curve there would be no income effect of the price changes of goods on the quantity demanded there would be no substitution effect of the price changes of goods on the quantity demanded
there would be no substitution effect of the price changes of goods on the quantity demanded
A(n) _____ is a measure, such as price or quantity, that can take on different values at different times. assumption hypothesis variable forecast
variable
