TEST 1
Markets
All of the above answers are correct.
Which of the following correctly describes how price adjustments eliminate a shortage?
As the price rises, the quantity demanded decreases while the quantity supplied increases.
Which of the following best reflects an increase in quantity supplied rather than an increase in supply?
The government stops controlling the price of a product, allowing the price to increase.
Which of the following will increase the demand for a normal good?
The price of the good is expected to increase in the future.
Which of the following statements is correct?
When demand increases, both the price and the quantity increase.
If demand is price elastic,
a 1 percent decrease in the price leads to an increase in the quantity demanded that exceeds 1 percent.
The idea of comparative advantage implies that people or countries
all of the above
The term ceteris paribus means
all other things remaining equal.
Opportunity cost is measured in terms of
both monetary value and time.
The observation that the demand curve for grape jelly shifted rightward every time the price of peanut butter fell means that grape jelly and peanut butter are
complements.
A minimum wage set above the equilibrium wage will
create a surplus of labor.
Toothpaste and toothbrushes are complements, so the ________ elasticity of demand is ________.
cross; negative
Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases. As a result, the demand for
cupcakes will increase, that is, the demand curve will shift rightward.
If macaroni and cheese is an inferior good, an increase in income will
decrease the demand for macaroni and cheese.
When supply decreases and demand does not change, the equilibrium quantity
decreases and the price rises.
A normal good is a good for which
demand increases when income increases.
A change in the price of a good
does not shift the good's demand curve but does cause a movement along it.
When the demand for a good decreases, its equilibrium price ________ and equilibrium quantity ________.
falls; decreases
If the price of crude oil falls, the equilibrium price of gasoline ________ and the equilibrium quantity ________.
falls; increases
The "law of supply" states that, other things remaining the same,
firms will produce more of a good the higher its price.
A price ________ makes it illegal to pay a lower price than the specified level. One example is
floor; the minimum wage.
A society that is on its production possibilities frontier is
fully utilizing its productive resources.
Which of the following is NOT one of the factors that influences the supply of a product?
income
Goods whose income elasticities are negative are called
inferior goods.
The quantity demanded of a good or service is the quantity that a consumer
is willing to buy at a particular price during a given time period.
Economics is best defined as the study of how people, businesses, governments, and societies
make choices to cope with scarcity.
Individual economic decisions are coordinated by
markets through adjustments in prices.
The study of the decisions of individual units in the economy is known as
microeconomics
When an action is chosen, the highest-valued alternative NOT chosen is called the
opportunity cost.
The equilibrium price and quantity are found at the
point where quantity supplied equals quantity demanded.
The cross elasticity of demand between Coca-Cola and Pepsi-Cola is
positive, that is, Coke and Pepsi are substitutes.
By itself, an increase in the number of suppliers in a market results in a
rightward shift in the supply curve.
When we say demand increases, we mean that there is a
rightward shift of the demand curve.
When supply decreases, the equilibrium price ________ and the equilibrium quantity ________.
rises; decreases
The demand for a good increases when the price of a substitute ________ and also increases when the price of a complement ________.
rises; falls
A production possibilities frontier (PPF)
shows combinations of two activities that are attainable with given resources.
Each point on the demand curve reflects
the highest price consumers are willing and able to pay for that particular unit of a good.
The more substitutes available for a product,
the larger is its the price elasticity of demand.
Each point on a supply curve represents
the lowest price for which a supplier can profitably sell another unit.
Producers' total revenue will decrease if
the price rises and demand is elastic
The "law of demand" states that changes in
the quantity demanded of a good are inversely related to changes in its price.
Which of the following is a microeconomic topic?
the reasons why Kathy buys less orange juice
The price elasticity of demand measures
the responsiveness of the quantity demanded to changes in price.
The market demand curve is
the sum of the quantity demanded by each individual at each price.
A change in which of the following shifts the demand curve?
the tastes and preferences of consumers
When a market is in equilibrium,
there is no shortage and no surplus at the equilibrium price.
If the price of chocolate chip cookies rises, then
there would be a movement upward along the demand curve.
If two variables are positively related
they move in the same direction over time.
A nation produces at a point inside its PPF
when it produces inefficiently.
If the slope of a line that graphs the relationship between variable x and variable y is positive, then we know that
when the value of variable x decreases, then the value of variable y decreases.
