Test 1

We would expect the cross elasticity of demand between Pepsi and Coke to be:

positive, indicating substitute goods.

The law of demand states that, other things equal:

price and quantity demanded are inversely related.

The demand curve shows the relationship between:

price and quantity demanded.

"The law of supply indicates that, other things equal: "

producers will offer more of a product at high prices than at low prices.

Copyrights and trademarks are examples of:

property rights

Which of the following is an intermediate good or service?

purchase of the paper used to print the book for this course.

Economists contend that most economic decisions are:

purposeful

"The demand schedules for such products as eggs, bread, and electricity tend to be: "

relatively price inelastic

An increase in your budget will do what to the budget line?

shift to the right

The economic purpose of profits and losses is to:

signal how resources should be used

Economics may best be defined as the:

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

If intermediate goods and services were included in GDP:

the GDP would be overstated.

Which of the following is most likely to be an inferior good?

used clothing

A leftward shift of a product supply curve might be caused by: A. an improvement in the relevant technique of production. B. a decline in the prices of needed inputs. C. an increase in consumer incomes. D. some firms leaving an industry.

D. some firms leaving an industry.

In economics another word for utility is

Happiness or satisfaction

The advent of DVDs has virtually removed the market for videocassettes. This is an example of:

creative destruction

"If the demand for product X is inelastic, a 4 percent increase in the price of X will: "

decrease the quantity of X demanded by less than 4 percent.

"If the demand for farm products is price inelastic, a good harvest will cause farm revenues to: "

decrease.

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is ____.

direct, inverse

Government ownership of resources and major industries is a central characteristic of the market system.

false

Higher rates of unemployment are linked with:

higher crime rates as the unemployed seek to replace lost income.

A market is in equilibrium:

if the amount producers want to sell is equal to the amount consumers want to buy.

You should decide to buy a laptop:

if the marginal benefit of the movie exceeds its marginal cost.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:

income effect

In which of the following instances will total revenue decline?

1.price rises and demand is elastic 2. price rises and demand is inelastic 3. price rises and supply is elastic 4.price falls and demand is elastic

Suppose the income elasticity of demand for toys is +2.00. This means that:

10 percent increase in income will increase the purchase of toys by 20 percent.

"Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to: " A. reduce the demand for tacos and increase the demand for sodas. B. reduce the demand for soda and increase the demand for tacos. C. increase the demand for both soda and tacos. D. reduce the demand for both soda and tacos.

B. reduce the demand for soda and increase the demand for tacos.

Other things equal, which of the following might shift the demand curve for gasoline to the left? A. the discovery of vast new oil reserves in Montana B. the development of a low-cost electric automobile C. an increase in the price of train and air transportation D. a large decline in the price of automobiles

B. the development of a low-cost electric automobile

"Suppose that corn prices (those received by the farmer) rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect: " "A. the supply of ethanol, a corn-based product, to increase." B. consumer demand for wheat to fall. C. the supply to increase as farmers plant more corn. D. the supply to fall as farmers plant more of other crops.

C. the supply to increase as farmers plant more corn.

Examples of command economies are:

Cuba and North Korea

The four factors of production are:

Land, Labor, Capital, and Entrepreneurial Ability

An antidrug policy which reduces the supply of heroin might:

increase street crime because the addict's demand for heroin is highly inelastic

Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?

Plasma screen and LCD TVs (+4.2)

Which of the following is a final good?

The purchase of the book for this class by a student.

Another word for market systems is capitalism.

True

"Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total revenue in the case(s) of: "

W and Y.

Economic systems differ according to which two main characteristics?

Who owns the factors of production, and the methods used to coordinate economic activity.

Unemployment describes the condition where:

a person cannot get a job but is willing to work and is actively seeking work.

"Suppose an economist says that ""Other things equal, the lower the price of bananas, the greater the amount of bananas purchased."" This statement indicates that: "

all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.

The main determinant of elasticity of supply is the:

amount of time the producer has to adjust inputs in response to a price change.

Inflation is defined as:

an increase in the overall level of prices

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that:

bicycles are normal goods

The price elasticity of demand coefficient measures:

buyer responsiveness to price changes

A nation's gross domestic product (GDP):

can be found by summing C + Ig + G + Xn.

Which of the following is a distinguishing feature of a command system?

central planning

Another word for command systems is

communism

Digital cameras and memory cards are:

complementary goods

DVD players and DVDs are:

complimentary goods

"When an economist says that the demand for a product has increased, this means that: "

consumers are now willing to purchase more of this product at each possible price.

A market:

is an institution that brings together buyers and sellers.

If a demand for a product is elastic, the value of the price elasticity coefficient is:

is greater than 1

GDP is the:

monetary value of all final goods and services produced within the borders of a nation in a particular year.

The price elasticity of demand is generally:

negative, but the minus sign is ignored.

We would expect the cross elasticity of demand between dress shirts and ties to be:

negative, indicating complementary goods.

National income accountants can avoid multiple counting by:

only counting final goods

The basic formula for the price elasticity of demand coefficient is:

percentage change in quantity demanded/percentage change in price.

A fundamental difference between the command system and the market system is that, in command systems:

the division of output is decided by central planning rather than by individuals operating freely through markets.

Macroeconomics is mostly focused on:

the economy as a whole

The elasticity of demand for a product is likely to be greater:

the greater the amount of time over which buyers adjust to a price change.

A production possibilities curve shows:

the maximum amounts of two goods that can be produced, assuming the full use of available resources.

"If a firm can sell 3,000 units of product A at $10 per unit and 5,000 at $8, then: "

the price elasticity of demand is 2.25.

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in:

the price of some other product.

The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that:

the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic.