BECO 3310

Refer to Figure 5-3. At a price of $70 per unit, sellers' total revenue equals

$1,050

Refer to Figure 4-7. Equilibrium price and quantity are, respectively,

$25 and 400 units.

Refer to Table 4-6. The equilibrium price and quantity, respectively, are

$3 and 50 units.

Refer to Figure 5-3. The maximum value of total revenue corresponds to a price of

$50

Refer to Figure 2-3. If this economy devotes all of its resources to the production of washers, then it will produce

0 dryers and 100 washers

If a 16 percent increase in price for a good results in a 7 percent decrease in quantity demanded, the price elasticity of demand is

0.44

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

0.47

If a 39 percent change in price results in a 35 percent change in quantity supplied, then the price elasticity of supply is about

0.90, and supply is inelastic

Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

1.5

Refer to Figure 2-4, Graph (a). The opportunity cost of moving from point S to point R is

2 tractors

Suppose the price of a bag of frozen chicken nuggets decreases from $6.60 to $6.50 and, as a result, the quantity of bags demanded increases from 600 to 620. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

2.15.

Refer to Table 5-2. Using the midpoint method, if the price falls from $160 to $120, the absolute value of the price elasticity of demand is

2.33.

Refer to Figure 2-3. The opportunity cost of this economy moving from point D to point C is

20 washers

Refer to Figure 4-5. If these are the only two sellers in the market, then the market quantity supplied at a price of $6 is

21 units

Refer to Figure 5-3. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is about

3.00

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a

50.00 percent decrease in the quantity demanded

Refer to Table 2-2. What is the opportunity cost to Supertown of increasing the production of toys from 200 to 300?

500 glasses

Which of the following changes would not shift the demand curve for a good or service?

A change in the price of the good or service.

For which of the following individuals would the opportunity cost of going to college be highest?

A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree

Refer to Figure 2-5. Which of the following events would explain the shift of the production possibilities frontier from A to B?

A general technological advance

Refer to Figure 2-3. It is not possible for this economy to produce at point

A.

Refer to Figure 5-4. If rectangle D is larger than rectangle A, then which of the following is not correct?

An increase in price from P1 to P2 will cause an increase in total revenue.

If consumers often purchase croissants to eat while they drink their cappuccinos at local coffee shops, what would happen to the equilibrium price and quantity of cappuccinos if the price of croissants rises?

Both the equilibrium price and quantity would decrease.

Refer to Figure 2-3. Efficient production is represented by which point(s)?

C, D

Coal is considered to be a nonrenewable energy source. Which of the following statements is correct?

Coal is a scarce resource.

For which of the following goods is the income elasticity of demand likely highest?

Diamonds

Which of the following is true?

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

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

In the simple circular-flow diagram, which of the following is not true?

Households are the only decision makers

Which of the following is likely to have the most price elastic demand?

Häagen-Dazs® vanilla bean ice cream

A hair stylist currently cuts and colors hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients

A donut shop sells fresh-baked donuts from 6 a.m. until 5 p.m. every day. The shop does not sell day-old donuts, so all unsold donuts are thrown away at 5 p.m. each day. The cost of making and selling a dozen donuts is $1; there are no costs associated with throwing donuts away. If the manager has seven dozen donuts left at 4 p.m. on a particular day, which of the following alternatives is most attractive?

Lower the price of the remaining donuts, even if the price falls below $1 per dozen.

Which of the following statements is valid when the market supply curve is vertical?

Market quantity supplied does not change when the price changes.

Where can an economy not produce?

Outside its production possibilities frontier

For which pairs of goods is the cross-price elasticity most likely to be positive?

Pens and pencils

Refer to Figure 4-10. Which of the following movements would illustrate the effect of an increase in the price of beach towels on the market for bathing suits?

Point A to Point D

Which of the following is not held constant in a demand schedule?

Price

You go to the movieplex where movies ordinarily cost $8.00. You are intending to see a movie for which you have a $2.50-off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

The amount you value the first movie + $2.50

Which of the following is not a determinant of the price elasticity of demand for a good?

The flatness of the supply curve for the good

For a particular good, a 10 percent increase in price causes a 5 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The market for the good is broadly defined.

Refer to Figure 2-7. Taking cause and effect into account, which of the following interpretations would be most reasonable regarding the relationship between coffee and hours without sleep?

The more coffee a person drinks per day, the more time he can go without sleep.

Which of the following would shift the supply of umbrellas to the left?

The number of firms making umbrellas decreases

Which of the following events would cause a movement upward and to the left along the demand curve for olives?

The price of olives rises.

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve.

Which is the most accurate statement about trade?

Trade can make every nation better off

Refer to Figure 4-1. The movement from point A to point B on the graph is caused by

a decrease in price.

Refer to Figure 4-6. The shift from S' to S is called

a decrease in supply

When society requires that firms reduce pollution, there is

a tradeoff because of reduced incomes to the firms' owners and workers.

When the government prevents prices from adjusting naturally to supply and demand, it

adversely affects the allocation of resources.

When we move along a given demand curve,

all nonprice determinants of demand are held constant.

Refer to Figure 4-3. The shift from Da to Db is called

an increase in demand

Refer to Figure 4-6. The shift from S' to S could be caused by

an increase in input prices

Refer to Figure 4-1. The movement from point A to point B on the graph shows

an increase in quantity demanded.

If muffins and bagels are substitutes, a higher price for bagels would result in

an increase in the demand for muffins.

Refer to Figure 4-6. The shift from S' to S in the market for chocolate cake could be caused by

an increase in the price of butter.

If a decrease in income increases the demand for a good, then the good is

an inferior good.

If the demand for a product increases, then we would expect equilibrium price

and equilibrium quantity both to increase.

Refer to Figure 5-4. Total revenue when the price is P1 is represented by

areas B + D.

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would

be positive, and your roommate's would be negative.

Equilibrium quantity must decrease when

both demand and supply decrease.

A good will have a more inelastic demand, the

broader the definition of the market.

Demand is said to be price elastic if

buyers respond substantially to changes in the price of the good

The price elasticity of demand measures

buyers' responsiveness to a change in the price of a good

A likely example of complementary goods for most people would be

coffee and sugar

Suppose you like to make, from scratch, pies filled with bananas and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would

decrease

Refer to Scenario 5-2. The equilibrium quantity will

decrease in both the milk and steak markets

Equilibrium price must decrease when

demand does not change and supply increases.

Cadence says that she would smoke one pack of cigarettes each day regardless of the price. If she is telling the truth, Cadence's

demand for cigarettes is perfectly inelastic

Economists sometimes give conflicting advice because

economists have different values and scientific judgments

The property of society getting the most it can from its scarce resources is called

efficiency

At the equilibrium price, the quantity of the good that buyers are willing and able to buy

exactly equals the quantity that sellers are willing and able to sell.

Large or persistent inflation is almost always caused by

excessive growth in the quantity of money.

The law of demand states that, other things equal, when the price of a good

falls, the quantity demanded of the good rises.

In the markets for goods and services in the circular-flow diagram,

firms provide households with output.

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

flatter the demand curve will be.

Pizza is a normal good if the demand

for pizza rises when income rises.

The "invisible hands" ability to coordinate the decisions of the firms and households in the economy can be hindered by

government actions that distort prices.

The basic principles of economics suggest that

government should become involved in markets when those markets fail to produce efficient or fair outcomes.

Refer to Scenario 5-2. The change in equilibrium price will be

greater in the milk market than in the steak market.

Refer to Scenario 5-2. The change in equilibrium quantity will be

greater in the steak market than in the milk market.

A circular-flow diagram is a model that

helps to explain how the economy is organized

In the simple circular-flow diagram, the participants in the economy are

households and firms.

Microeconomics is the study of

how individual households and firms make decisions

A likely example of substitute goods for most people would be

iced tea and lemonade

When two variables have a positive correlation,

if the x-variable decreases, the y-variable decreases.

Trade between countries tends to

increase both competition and specialization.

If the price elasticity of supply is 0.7, and price increased by 24 percent, quantity supplied would

increase by 16.80 percent

Refer to Scenario 5-2. The equilibrium price will

increase in both the milk and steak markets.

A decrease in the price of a good will

increase quantity demanded.

An increase in the price of a good will

increase quantity supplied

Refer to Scenario 5-2. Total consumer spending on milk will

increase, and total consumer spending on steak will decrease.

Warrensburg is a small college town in Missouri. At the end of August each year, the market demand for fast food in Warrensburg

increases.

An increase in the overall level of prices in an economy is referred to as

inflation.

Prices direct economic activity in a market economy by

influencing the actions of buyers and sellers

An economy's production of two goods is efficient if

it is impossible to produce more of one good without producing less of the other.

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

lower both price and total revenues

In the short run, an increase in the money supply is likely to lead to

lower unemployment and higher inflation

The term used to describe a situation in which markets do not allocate resources efficiently is

market failure.

A competitive market is a market in which

no individual buyer or seller has any significant impact on the market price

When recommending specific policies to undertake, economists make

normative statements

Another term for goods and services is

output

The production possibilities frontier provides an illustration of the principle that

people face trade-offs.

The adage, "There ain't no such thing as a free lunch," means

people face tradeoffs

Refer to Figure 2-4, Graph (a). Production is

possible at points P, Q, R, and S, but efficient only at points P, R, and S.

Refer to Figure 2-4, Graph (a). Production at point Q is

possible but inefficient

Normative statements are

prescriptive

The ability of an individual to own and exercise control over scarce resources is called

property rights

In the early 19th century, the Russian government sent doctors to southern Russian villages to provide assistance during a cholera epidemic. The villagers noticed that wherever doctors appeared, people died. Therefore, many doctors were chased away from villages, and some were even killed. This reaction to the correlation between doctors and deaths is most likely a problem of

reverse causality

Resources are

scarce for households and scarce for economies.

What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?

scarcity

Fundamentally, economics deals with

scarcity.

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

sell the ticket because the marginal benefit exceeds the marginal cost.

Refer to Figure 4-7. At a price of $15, there would be a

shortage of 400 units.

The market supply curve

shows how the total quantity supplied of a good varies as the price of that good varies.

Economists make assumptions to

simplify the complex world and make it easier to understand.

A improvement in production technology will shift the

supply curve to the right.

Refer to Table 4-6. If the price were $4, a

surplus of 25 units would exist, and price would tend to fall.

For a good that is a luxury, demand

tends to be elastic

In most societies, resources are allocated by

the combined actions of millions of households and firms.

The primary determinant of a country's standard of living is

the country's ability to produce goods and services.

Alana decides to spend 2 hours working overtime rather than going shopping with her friends. She earns $11 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone shopping

The bowed-outward shape of the production possibilities frontier can be explained by the fact that

the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.

When computing the opportunity cost of attending a professional football game as a spectator, you should include

the price you pay for the ticket and the value of your time.

Income elasticity of demand measures how

the quantity demanded changes as consumer income changes.

Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes.

Cross-price elasticity of demand measures how

the quantity demanded of one good changes in response to a change in the price of another good.

The price elasticity of supply measures how much

the quantity supplied responds to changes in the price of the good.

If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in

the same price and higher total revenue from marijuana sales.

Savion's aunt gave him $25 for his birthday with the condition that Savion buys himself something. In deciding how to spend the money, Savion narrows his options down to four choices: Option 1, Option 2, Option 3, and Option 4. Each option costs $25. Finally, he decides on Option 2. The opportunity cost of this decision is

the value to Savion of the option he would have chosen had Option 2 not been available.

A key determinant of the price elasticity of supply is the

time horizon

Economics is the study of how society manages its

unlimited wants and limited resources

The opportunity cost of an item is

what you give up to get that item

The quantity demanded of a good is the amount that buyers are

willing and able to purchase