Chapter 1-4

An effective price ____ is an enforced regulation that sets the legal price below the market clearing​ price, which often leads to nonprice rationing devices and ____ markets.

ceiling, black

Governments sometimes impose price controls in the form of price ____ and price ____.

ceilings, floors

The city of New Raven has decided to impose rent controls on office buildings in the city. As a result of​ this, the new rent

celing is lower than the equilibrium rent and there will be a shortage of rental offices.

Each country has a unique economic system to allocate its scarce resources.​ However, the economic system of most of the​ world's nations are a combination of the _____ system and the _____ system.

central planning price

When both supply and demand​ decrease, the equilibrium price​ ________ and the equilibrium quantity​ ________.

change is​ uncertain decreases

Effective rent ____ impede the functioning of rental prices. Construction of new rental units is discouraged.

controls

​"We ought to do more for the education of our​ children." Statements using words like ought or should are

normative statement.

The assumption of bounded rationality suggests that people might use rules of thumb to guide their decision making because

people can not examine every possible choice available to them.

Import quotas are an example of​ government-imposed

quantity restrictions.

Even when businesspeople can change​ prices, some rationing by waiting may occur. Such ____arises when there are large changes in demand coupled with high costs of satisfying those changes immediately.

queuing

In a rent controlled​ market, we would expect to observe

renters moving into the market to take advantage of the lower rents.

Each individual must make choices because

resources are limited and therefore cannot satisfy​ one's many competing wants.

A point inside the PPC means that

resources are not being fully utilized due to unemployment or inefficiency.

Scarcity

results from unlimited wants coupled with limited resources.

In a price​ system, changes in prices

signal to consumers that some goods are relatively more or less scarce.

Other things remaining​ equal, the law of demand says that higher prices will lead to a

smaller quantity demanded and lower prices to a larger quantity demanded.

When the ____ curve shifts outward or inward given an unchanged ____curve, equilibrium price moves in the direction opposite to equilibrium quantity.

supply demand

A decrease in the number of pizza producers or an increase in the cost of mozzarella cheese used to make pizza will shift the

supply curve for pizza inward.

With an agricultural ​price ____ system, the government sets a minimum price at​ which, say, qualifying farm products can be sold. Any farmers who cannot sell at that price in the market can​ "sell" their surplus to the government. The only way this system can survive is for the government or some other entity to buy up the excess quantity supplied at the support price.

support

The economic system in which individuals and families own all of the scarce resources used in​ production, decide how and what to​ produce, and how many products to​ produce, is best described as a price system.

True

(T/F) A black market is a market in which a​ price-controlled good is sold at an illegally high price.

True.

(T/F) An import quota is a supply restriction that prohibits the importation of more than a specified quantity of a particular good in a​ one-year period.

True.

(T/F) Consumer surplus is the difference between the total amount that consumers would have been willing to pay for an item and the total amount that they actually pay.

True.

(T/F) Middlemen specialize in lowering transaction costs.

True.

(T/F) Rationing by the price system leads to the most efficient use of available resources.

True.

(T/F) Voluntary exchange refers to an act of trading between individuals that makes both parties to the trade subjectively better off.

True.

A model is considered​ "good" if it yields usable predictions that are supported by​ real-world observations.

True.

Economics is a science since the study of economics uses models and theories that are subject to empirical testing.

True.

The bounded rationality hypothesis assumes people are not fully rational and therefore use simple rules of thumb to sort among the alternatives that happen to occur to them.

True.

The rationality assumption of economics is the assumption that people do not intentionally make decisions that would leave them worse off.

True.

A production possibilities curve represents

all possible combinations of output that could be produced assuming fixed productive resources and their efficient use.

The economic way of thinking will

allow you to make better decisions.

The division of labor increases the output of society by

allowing resources to specialize in the tasks for which they have a comparative advantage.

A demand schedule gives a schedule of​ ________ quantities demanded per time dimension at​ ________.

alternative; different possible prices

The economic way of thinking is best described as

an analytical framework enabling one to reach informed conclusions.

A rightward shift in the supply curve for a good may be caused by any of the following except

an increase in average consumer income.

An​ above-equilibrium minimum wage will result in​ ________ in the quantity of labor demanded and​ ________ in the quantity of labor supplied.

a​ decrease; an increase

A price ceiling is

a​ government-imposed maximum price that may be charged for a good or​ service, which can lead to shortages.

The law of demand states that

as price​ increases, quantity demanded​ decreases, all other things equal.

The law of supply states that

as price​ increases, quantity supplied​ increases, all other things equal.

Economics

assumes individuals are rational and respond to different incentives.

Rent Demanded Supplied ​$400 3,000 ​1,600 ​$450 2,500 ​1,800 ​$500 ​ 2,000 ​2,000 ​$550 ​1,500 2,200 ​$600 ​1,000 2,400 1. What is the market price of apartments in this​ town? 2. What is the equilibrium quantity of apartments in this​ town? 3.If this town imposes a rent control of​ $450 per​ month, how many studio apartments will be​ rented?

1. $500 2. 2000 3. 1800

Which of the following is not generally considered to be a resource​ (factor of​ production)?

A bond.

Suppose that the price of a bag of coffee is $10 and the price of a box of tea is $6. -What is the relative price of a bag of coffee​? -What is the relative price of a box of tea​?

1.667 (price of coffee / price of tea) 0.6 (price of tea / price of coffee)

Which of the following would cause a decrease in the demand for beef​?

A decrease in the price of fish​, a substitute for beef.

Which of the following is not true about economic​ models?

A good model must be realistic.

Which of the following statements about production possibilities curves is not​ true?

A linear production possibility curve illustrates the concept of increasing opportunity costs.

What happens in the market with an upward sloping supply curve when there is a shift in the demand curve due to an external​ shock?

A new equilibrium price will be achieved over some period of time.

Which of the following is consistent with the law of​ demand?

A reduction of the price of salt led to a 5 percent increase in the quantity of salt purchased.

Given the existence of relative​ scarcity, resources can be rationed by

A. a system of prices. B. ​queuing, or standing in line. C. political mandate. D. All of the above!!!!!

Price​ ceilings, such as rent controls

A. reduce tenant mobility as people may be reluctant to change apartments. B. discourage the construction of new housing. C. lead to the deterioration of existing housing. D. All of the above!!!!!

What is the difference between absolute advantage and comparative​ advantage?

Absolute advantage is when someone can produce more of a good using a given quantity of inputs while comparative advantage is when someone can produce a good at a lower opportunity cost.

What is the economic effect of price​ ceilings?

An effective price ceiling will lead to a shortage.

Increased demand for laptop computers will drive up their price.

An improvement in computer manufacturing technology.

Consider the following statement based on a positive economic analysis that assumes that all other things remain​ constant: Falling gasoline prices will result in additional vacation travel. Which of the following​ (initially assumed​ constant) could occur and thus offset the stated​ outcome?

An increase in hotel taxes at popular resorts.

Which of the following is consistent with the law of​ supply?

An increase in the market price of MP3 players causes an increase in the production of MP3 players.

Consider the following statement based on a positive economic analysis that assumes that all other things remain​ constant: A reduction in income tax rates will result in more people working. Which of the following​ (initially assumed​ constant) could occur and thus offset the stated​ outcome?

An increase in the outsourcing of jobs.

Which of the following would cause a decrease in the supply of beef​?

An increase in the price of inputs to beef production.

Which of the following is a true statement about​ self-interest as used in the study of​ economics?

Any action can be based on​ self-interest if the person has some reason for the action

Celeste, who uses earnings from her regularly scheduled hours of​ part-time work to pay for her room and board at​ college, will decide to buy a newly released DVD this week only if she is able to work two additional hours.

Based on the rationality assumption.

For every 10 exam points Myrna must earn in order to pass her economics course and meet her graduation​ requirements, she will study one additional hour for her economics test next week.

Based on the rationality assumption.

The table above indicates the demand schedules for four types of consumers. Suppose there are 8,000 consumers, evenly divided between the four types of customers above (A−​D). The quantity demanded at a price of​ $7 is

Divide 8000 / 4 to find number for each row go to $7 row (QA x A#) + (QB x B#) + (QC x C#) + (QD x D#) = answer

There are simultaneous changes in the demand for and supply of​ global-positioning-system (GPS)​ devices, with the consequences being an unambiguous decrease in the market clearing price of these devices but no change in the equilibrium quantity. What changes in the demand for and supply of GPS devices could have generated these​ outcomes?

Demand decreases and supply increases.

There are simultaneous changes in the demand for and supply of tablet​ devices, with the consequences being an unambiguous decrease in the equilibrium quantity of these devices but no change in the market clearing price. What changes in the demand for and supply of tablet devices could have generated these​ outcomes?

Demand increases and supply increases.

Which of the following statements is​ true?

Economics is a science since the study of economics uses models and theories that are subject to empirical testing.

Elizabeth can make 5 dozen cupcakes or 1 chocolate cake in one hour. Steven can make 3 dozen cupcakes or 1 chocolate cake in one hour. Based on this​ information, which of the following is a true​ statement?

Elizabeth has a comparative advantage in making cupcakes

(T/F) Markets which are temporarily out of equilibrium will always return to equilibrium immediately.

False

(T/F) When both supply and demand curves​ change, the outcome is definite for both equilibrium price and equilibrium quantity.

False

(T/F) In​ general, the less organized the​ market, the lower the transaction costs.

False.

(T/F) Most of the benefits from agricultural price supports have gone to​ small, family-owned farms.

False.

(T/F) Producer surplus is the sum of the total amount that producers would have been willing to accept for supplying an item and the total amount that they actually receive.

False.

(T/F) Rent control is a type of price floor.

False.

(T/F) The minimum wage is an example of a price ceiling.

False.

(T/F) The total value of the gains from trade is equal to the difference between producer surplus and consumer surplus.

False.

Labor is a key input at​ fast-food restaurants. Suppose that the government boosts the minimum wage above the equilibrium wage of​ fast-food workers. Which of the following best describes the response of the quantity of labor employed at​ restaurants?

Fewer workers will be employed since the wage increase will induce managers to seek to substitute other inputs for the now relatively more expensive labor.

Suppose a student is trying to decide whether or not to take another economics class. Which of the following is not an aspect of the economic way of thinking that would apply in this​ decision-making process?

Flipping a coin.

Suppose an employer is trying to decide whether or not to hire another worker. Which of the following is not an aspect of the economic way of thinking that would apply in this​ decision-making process?

Flipping a coin.

To which of the following​ household-type(s) does the phrase​ "unlimited wants and limited resources​" ​apply? I. A​ low-income household II. A​ middle-income household III. A​ high-income household

I, II, and III.

Identify which of the following would generate a decrease in the market demand for​ e-book readers, which are a normal good. I. An increase in the price of downloadable apps utilized to enhance the​ e-book reading​ experience, which are complements. II. An increase in the number of consumers in the market for​ e-book readers. III. A decrease in the price of tablet​ devices, which are substitutes. IV. A reduction in the income of consumers of​ e-book readers.

I, III and IV.

Assume the cost of aluminum used by​ soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft​ drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases. Part 3

II and III.

Until​ 2008, the people of the fictitious nation of Dor relied mainly on private car companies to determine how many automobiles to produce. After​ 2008, the people of Dor have been relying on the Dor government to determine how many automobiles to produce. This represents a shift in the economic system of Dor from

Market System to Central Planning.

____, also known as​ intermediaries, specialize in linking ultimate sellers and buyers and lowering these​ parties' ____ costs.

Middlemen transaction

A coin toss will best predict​ Leonardo's decision about whether to purchase an expensive business suit or an inexpensive casual outfit to wear next week when he interviews for a​ high-paying job he is seeking.

Not based on the rationality assumption.

Which of the following is an implication of the law of​ supply? The law of supply then implies that a ____ ____ the supply curve occurs due to a change in market price.

Producers will offer more units at a higher price and fewer units at a lower price. movement along

Rachel has an absolute advantage in cooking and Grace has an absolute advantage in ironing. Assuming that the population consists only of Rachel and Grace​,we know that

Rachel has a comparative advantage in cooking and Grace has a comparative advantage in ironing.

____ prices perform three​ functions: (1) allocating existing scarce housing among competing​ claimants, (2) promoting efficient maintenance of existing houses and stimulating new housing​ construction, and​ (3) rationing the use of existing houses by current demanders.

Rental

What is the relationship between wants and​ resources?

Resources are used to produce things that satisfy​ people's wants.

What is the economic effect of price​ floors?

Surpluses.

Which of the following would be a topic of study in microeconomics​?

The amount of steel purchased by General Motors.

Suppose that you are investigating the market for wheat. The price of corn​, a substitute​ good, has decreased. Which of the following would best describe the market reaction to this​ event?

The demand for wheat decreases, which creates a surplus of wheat​, causing the price of wheat to decrease.

Falling gasoline prices will result in additional vacation travel.

The economy enters a recession with increased unemployment.

Which of the following is not an example of a transaction​ cost?

The enjoyment of using the good.

In a market​ system, how are the terms of exchange​ established?

The forces underlying supply and demand interact to set a price.

A reduction of income tax rates will result in more people working.

The foreign exchange value of the dollar increases causing domestic exports to decline.

Kyla is buying clothes. She can choose between blue jeans​, khaki pants​, and black jeans. She​ doesn't like black jeans​, and after some​ thought, she chooses blue jeans. What is the opportunity cost of this​ choice

The khaki pants.

Marissa is buying vegetables. She can choose between carrots​, lettuce​, and green beans. She​doesn't like green beans​, and after some​thought, she chooses carrots. What is the opportunity cost of this​choice

The lettuce.

The price of orange juice increases. Which of the following is not part of the likely chain of events that follows from this price​ change?

The manufacturers of orange−picking machines lay off some workers.

The concept of consumer surplus is best described by the following situation.

The maximum price that Jackie was willing to pay for an iphone was​ $400, but she bought it for​ $250 on black Friday.

Suppose that at first the price of a bag of coffee is $15 and the price of a box of tea is $9. Then, the price of a bag of coffee changes to ​$30 and the price of a box of tea changes to $21. What has happened the money prices and relative prices of these two​ goods?

The money price of a bag of coffee and a box of tea have risen and the relative price of a bag of coffee has fallen while relative price of a box of tea has risen.

Suppose that at first the price of a pair of shoes is $5 and the price of a t−shirt is $3. Then, the price of a pair of shoes changes to $10 and the price of a t−shirt changes to $7. What has happened the money prices and relative prices of these two​ goods?

The money price of a pair of shoes and a t−shirt have risen and the relative price of a pair of shoes has fallen while relative price of a t−shirt has risen.

--------------------2003-----2004 Hospital Room $250 $275 Hotel Suite $350 $375 Based on the table​ above, which of the following is​ true?

The money prices of both goods​ increased, the relative price of hospital rooms​ increased, and the relative price of hotel suites decreased

If you receive a free ticket to a​ concert, what, if​ anything, is your opportunity cost of attending the​ concert? If miserable weather on the night of the concert requires you to leave much earlier for the concert hall and greatly extends the time it takes to get home​ afterward, the opportunity cost of attending the concert

The next best activity that​ can't be done while attending the concert. increases.

What is relative price?

The price of a commodity in terms of another commodity

The market for corn is initially in equilibrium. Suppose the production of​ biofuels, which use corn as an​ input, increases​, and at the same​ time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn​ market?

The price of corn will rise​, but the effect on equilibrium quantity cannot be determined without more information.

A professor with a Ph.D. in Economics can write a short essay in economics in 2 hours and can mow the lawn in 4 hours. A student in economics can write a short essay in economics in 4 hours and can mow the lawn in 4.5 hours. Which of the following statements is​ true?

The professor should write the essay since he has the comparative advantage in writing.

Suppose that a rap group called RG2 has released its first CD with Live Records at an intended list price of​ $14.99. Music stores have discovered that they can markup the price to​ $17.99 with continued strong sales. What information does this higher price convey to the recording​ label?

The recording label should expand the production and distribution of RG2​'s first CD.

Last​ year, the price of chicken was ​$6 per pound and the price of fish was ​$7 per pound. This​ year, the price of chicken is ​$10 per pound and the price of fish is ​$11 per pound. All other things​ equal, and assuming that Brian purchased both items​ before, what would you expect to happen to his purchases of chicken ​(relative to fish​) this​ year?

The relative price of chicken has​ increased, so Brian would be expected to purchase less.

The graph shows a production possibilities curve for a student who currently spends 8 hours a week studying. How could the student get a B in both​ classes?

The student could study more than 8 hours a week.

Why do economists avoid making the distinction between wants and needs​?

The term need is subjective making it difficult to distinguish between something someone wants and something they need.

In a​ market-based economy, what is the role of a system of​ prices?

To address the problem of scarcity.

(T/F) A market demand curve is derived by summing​ (at each​ price) the individual quantities demanded by all buyers in the market.

True

Which of the following statements is true concerning the consequences of rent​ controls?

Upper income earners are big winners due to the fact that they can better exploit nonprice rationing devices.

Suppose that the U.S. federal government has borrowed​ $500 billion to expand its total spending on goods and services across the entire economy in an effort to boost by​ $500 billion the aggregate production by the​ nation's firms. Would we apply microeconomic or macroeconomic analysis to analyze this policy​ action?

We would apply macroeconomic analysis because this policy action would affect the behavior of the economy as a whole.

Suppose that the government has raised by​ $10 a​ per-carat tax rate it imposes on diamonds in an effort to influence production of this particular good by each of the firms that produce it and purchases by individual consumers. Would we apply microeconomic or macroeconomic analysis to analyze this policy​ action?

We would apply microeconomic analysis because this policy action would affect decision making undertaken by individuals​ (or households) and by firms.

Which of the following describes an inferior​ good?

When consumer income​ increases, the demand for eggs decreases.

Which of the following is not one of the three fundamental questions of​ economics?

Where will items be​ produced?

The three fundamental economic questions that a nation addresses in order to allocate​ society's scarce resources include all of the following ​except:

Why will the items be​ produced?

Does the richest person in the world face the problem of​ scarcity?

Yes, because even if you have money you will never be able to satisfy all of your wants and must therefore make choices

One of your​ classmates, Sally, is a hardworking​ student, serious about her​ classes, and conscientious about her grades. Sally is also​ involved, however, in volunteer activities and an extracurricular sport. Is Sally displaying rational behavior?

Yes, she is using her time allocated among​ school, studying, sports and volunteer work in a manner she deems best.

A leftward shift in the supply curve for a good may be caused by any of the following except

a change in consumer preferences.

The economic system in which a government establishes ownership of resources and issues rules for how to manage the production of products is best described as

a command and control system.

The effect of a quantity restriction is

a higher price.

A politician states​ "taxes should be raised to provide more spending on school lunch​ programs." This is

a normative economic statement.

An increase in the price of cigarettes will reduce the amount of cigarettes purchased. This is

a positive economic statement.

An increase in the price of gasoline will reduce the amount of gasoline purchased. This is

a positive economic statement.

The minimum wage is an example of

a price floor.

The consequences of decriminalizing illegal drugs have long been debated. Some claim that legalization will lower the price of these drugs and reduce related crime. Others claim that more people will use these drugs. Suppose that some of these drugs are legalized so that anyone may sell them and use them. Based on positive economic​ analysis, such decriminalization will lead to

a reduction in price of these drugs and an increase in quantity demanded.

If the current price of a good is less than the equilibrium​ price, there will be

a shortage of the good and its price will increase.

All of the following will decrease the supply of train trips except

a technological change that makes trains safer and more​ fuel-efficient.

Scarcity implies that

a way of rationing supplies of goods must be found.

As long as a price floor is​ ________ the market clearing​ price, imposing a price floor creates a​ ________.

above; surplus

Economists assume that when there is a change in demand​ and/or supply, that prices reach a new equilibrium

after an adjustment period that varies.

The law of demand posits ____ relationship between the quantity demanded of a good and its​ price, other things being equal.

an inverse

Julie goes to a cooking academy to become a chef. This is an example of

an investment in human capital.

A decrease in the price of a complement good Y will lead to

an outward shift in the demand for good X.

An increase in the price of a substitute good Y will lead to

an outward shift in the demand for good X.

Specialization of labor and trade yield greater economic efficiency when applied to interstate​ trade,

and when applied to international trade.

The relative price of any commodity is its price in terms of

another commodity.

The publication Car and Driver reduces transactions costs for​ high-performance car buyers

by providing reliable information so that car buyers do not have to spend as much time doing their own research.

If the price of coffee​ rises, and as a result the demand for sugar​ falls, this implies that these two goods are ____.

complements

We measure the demand schedule in terms of a time dimension and in ____-quality units.

constant

According to the law of increasing additional​ cost, the opportunity cost of producing

cotton is likely to increase as society tries to produce more cotton.

Firms providing wireless​ (an alternative to​ cable) Internet access services reduce their prices. This will cause​ a(n)

decrease in demand.

There is a decrease in the incomes earned by consumers of​ cable-based Internet access services. This will cause​ a(n)

decrease in demand.

The law of ____ applies when other​ things, such as income and the prices of all other goods and​ services, are held constant.

demand

When the ____ curve shifts outward or inward with an unchanged ____​curve, equilibrium price and quantity increase or​ decrease, respectively.

demand supply

When there is a normal good​, an increase in consumer income will result in the

demand curve shifting to the right.

During her years of​ college, Dominique discovered that her three favorite subjects were​ astronomy, chemistry, and political science. She chose to major in astronomy because she had seen data indicating that science majors earn​ higher-than-average wages and because she liked astronomy better than both chemistry and political science. Upon​ graduation, however, she learned that average wages in chemistry fields were 20 percent higher than average wages earned by astronomers. Did​ Dominique's behavior violate the rationality​ assumption? Dominique's decision to major in astronomy

did not violate the rationality assumption because she preferred ​astronomy, and​ because, at the time she made her​ decision, data showed science majors earn​ higher-than-average wages.

According to the​ text, firms encounter rising costs when they attempt to produce more in the same time period. As a​ consequence, they must be offered a higher price to be willing to incur these higher costs. The resulting relationship between price and quantity supplied is

direct​ (or positive) and is called the law of supply.

Government-enforced prices such as price ceilings

disrupt the rationing function performed by prices in a market system.

The production possibilities curve will shift outward​ (upward, and​ or, to the​ right) when

economic growth occurs.

A​ society's institutional mechanism for determining the way in which scarce resources are used to satisfy human desires refers to its

economic system.

Gains from trade are

equal to the sum of consumer surplus and producer surplus.

If the price of automobiles ____ and as a result the demand for motorbikes​ falls, this implies that these two goods are substitutes.

falls

Many state governments claim a shortage of funds because there are​ "unmet needs." This claim is

false because of scarcity.

Prices in a market economy perform a rationing function because they reflect relative​ scarcity, allowing the market to clear. Other ways to ration goods in an economy include _____________.

first come first served, political power, physical force, random assignment and coupons.

When a ____ is placed on wages at a rate that is above market​ equilibrium, the result is an excess quantity of labor supplied at that minimum wage.

floor

Buyers and sellers receive information about what should be bought and what should be produced

from prices in a market system.

The following table indicates the supply schedules for four types of​ producers: ​A, B, C​, and D and the number of producers in each group​ (top row).The quantity supplied by each type of producer (QA​,QB​,QC​,and QD​) is shown for market prices ranging from​ $8 down to​ $2. What is the combined quantity supplied at a market price of ​$3​?

go to $3 row (QA x A#) + (QB x B#) + (QC x C#) + (QD x D#) = answer

Economic goods are

goods that are scarce.

A surplus occurs when quantity supplied is​ ________ than quantity demanded at a price​ ________ the market clearing price.

greater; above

Economics is best defined as the study of

how people allocate limited resources to satisfy unlimited wants.

When there is a shift in demand or​ supply, the new equilibrium price is not obtained ____. Adjustment ____.

immediately takes time

Quantity restrictions may take the form of ____ which are limits on the quantity of specific foreign goods that can be brought into the United States for resale purposes.

import quotas

Consumers' tastes shift away from using wireless Internet access in favor of​ cable-based Internet access services.

increase in demand.

Firms providing​ cable-based Internet access services reduce their prices. This will cause​ a(n)

increase in quantity demanded.

Other things remaining​ equal, a decrease in the world oil supply like those that occurred in​ 1973-74 and 1979 would

increase the price of airline travel and decrease its equilibrium quantity.

If the price of tennis racquets​ falls, and as a result the demand for tennis balls ____ this implies that these two goods are complements.

increases

Opponents of minimum wage legislation argue that higher minimum wages serve to

increase​ unemployment, particularly among unskilled minority teenagers.

The rationality assumption implies that

individuals will not intentionally make decisions that leave them worse off.

You and a friend decide to spend​ $100 each on concert tickets. Each of you alternatively could have spent the​ $100 to purchase a​ textbook, a meal at a highly rated local​ restaurant, or several internet movie downloads. As you are on the way to the​ concert, your friend tells you that if she had not bought the concert​ ticket, she would have opted for a restaurant​ meal, and you reply that you otherwise would have downloaded several movies. The relevant opportunity costs for you and your friend of the concert tickets that you purchased are

internet movie downloads for you and a meal at a highly rated local restaurant for your friend.

According to the law of​ demand, the quantity demanded of any commodity is​ ________ related to its​ price, other things being equal.

inversely

Based on the recommendation of a​ friend, you buy a ticket and attend a movie with high expectations. After seeing the​ movie, you think that it is the worst film ever made and that it was a complete waste of money. This situation

is consistent with rational behavior because you had thought that you were going to like the movie.

Opportunity cost

is the value of the next best alternative as a result of choosing some given alternative

Specialization and comparative advantage

lead to greater productivity. lead to greater output even if you can do everything better than someone else. lead to international trade and overall gains for the nations involved. All of the above.

Suppose that the government decides to place a ceiling on a specific​ Medicare-approved prescription​ drug, and it establishes the price ceiling below the previous equilibrium price of the drug. How will manufacturers of this drug respond to the​ government's price​ control? If the price ceiling is below the market clearing​ price, quantity supplied will be​ __________ the quantity demanded. As a​ result, a​ __________ will exist in the market.

less​ than; shortage

The impact of the national debt on the​ economy's unemployment is an example of

macroeconomics analysis.

Voluntary exchange

makes both parties to a trade better off.

The ____ ____ curve is derived by summing the quantity demanded by individuals at each price.

market demand

Canada goes to considerable lengths to protect its television program and magazine producers from U.S. competitors. The United States often seeks protection from food imports from Canada. From an economywide​ viewpoint, these efforts are

misguided because the enhanced output from specialization based upon comparative advantage is restricted.

Which of the following is not a factor of production

money.

An inverse graph has what kind of slope?

negative

The ceteris paribus assumption means

other things equal.

A key feature of the ____ system is ____ exchange​, which involves trades between individuals that they both perceive to raise their​ well-being.

price voluntary

Black markets usually arise when there are

price ceilings.

When demand decreases and the​ (upward sloping) supply curve remains in the same​ position,

price falls and equilibrium quantity falls.

When supply increases and the​ (downward-sloping) demand curve remains in the same​ position,

price falls and equilibrium quantity rises.

A production possibilities curve that is bowed outward​ (from the​ origin) represents the concept that

production of additional units of one good requires that increasing quantities of the other good be given up.

Farmer McDonald has 100 acres of land on which he can grow soybeans or corn. An acre of land yields 200 bushels of soybeans or 100 bushels of corn or some combination of both. The accompanying figure refers to farmer​ McDonald'

production possibilities curve.

Any activity that results in the conversion of resources into products that can be used in consumption is called

production.

People often complain about price gouging after a natural disaster. Suppose the government imposed limitations on price increases in the aftermath of a disaster. One would expect

reconstruction to take longer because the quantity supplied of new materials would increase more slowly.

In a price​ system,

relative prices change constantly to reflect changes in supply and demand.

All of the following are government imposed quantity restrictions except

rent controls.

Economists assume that an individual acts as if motivated by

self-interest.

Economic growth can be pictured in the accompanying diagram by

shifting the PPC upward and outward.

An economic model

should capture only the essential relationships that are sufficient to analyze a particular problem or answer a particular question.

The division of productive activities among persons and regions so that no one individual or region is totally​ self-sufficient is known as

specialization.

The rationality assumption as used in economics

states that people respond to incentives.

If the price of bacon​ rises, and as a result the demand for sausage​ increases, this implies that these two goods are ____.

substitutes

If a decrease in the price of soft drinks leads to a decrease in demand for bottled​ water, the two goods must be

substitutes.

If an increase in the price of soft drinks leads to an increase in demand for bottled​ water, the two goods must be

substitutes.

The primary losers from minimum wages are

teenage and unskilled workers.

One reason that economists use microeconomics as the basis of macroeconomic analysis is

that all choices are made by individuals and firms.

Using the diagram to the​ right, click on the point labeled ​'S​' and drag the ​'savings​' slider to the right ​(denotes the production of more capital goods​). Use this to help answer the question below. If a country devotes more resources toward the production of capital goods and less toward consumer goods then

that country will experience greater economic growth.

The existence of scarcity requires

that people must make choices and face​ trade-offs in using their resources.

An economic model is developed from a set of assumptions about consumer behavior and predicts that people will buy less of a good the higher the price of the good. Empirical testing of this model would involve

the collection of data to evaluate the usefulness of the model.

Greater economic growth is shown as

the distance the production possibilities curve shifts outward.

Decisions must frequently be made by​ individuals, organizations, and even nations. Facilitating better​ decision-making is a fundamental goal of economics. The analytical framework advocated by economists that enables one to make informed decisions is called

the economic way of thinking.

​Rational, self-interested government officials seeking more funding for mass transit through higher taxes should consider

the fact that raising taxes is generally unpopular and may result in a potential loss in a future election.

Suppose the market price of corn is​ $5 a bushel but the government sets a price of​ $7. As a​ result,

the government must purchase the surplus to maintain the price.

Some people claim that the​ "economic way of​ thinking" does not apply to issues such as health care. All of the following choices clearly demonstrate how economics applies to this​ issue, except when

the individual decides against health​ care, as not having it may make him better off.

When Adam​ Smith's ten pin workers​ specialized, they were able to increase the output of pins in a day from 200 to​ 48,000. One reason for the increase in pin production was due to

the mastery each worker achieved over his assigned task.

Whenever a society forgoes current consumption in order to invest in capital​ goods,

the more the society can consume in the future.

Suppose a woman believes that men working in manufacturing earn lower wages and therefore have less to offer to a combined household. If she decides not to marry a man for this​ reason, all other things​ equal, her behavior is consistent with

the rationality assumption.

Economics is

the study of how limited resources are allocated to satisfy unlimited wants.

Opportunity cost refers to

the value of the​ next-best alternative.

A municipality taxing hotel guests to obtain funding for a new sports stadium should consider all of the​ following, except

the winning potential of the sports team using the stadium.

When an individual proclaims the need for a new​ car, the person typically means

they want something they currently do not have.

Suppose that in the figure to the​ right, a nation currently has sufficient resources to produce combinations located along only the innermost production possibilities​ curve, labeled A. In​ addition, suppose that the​ nation's residents have determined that smartphones function mainly as consumption goods while tablet devices function primarily as capital goods. If the nation produces no additional smartphones this​ year, will the​ intermediate-shifted PPC resulting from minimal economic​ growth, labeled​ B, or the​ farthest-shifted PPC caused by more significant economic​ growth, labeled​ C, be more likely to apply next​ year? If the nation produces no additional smartphones this​ year, the PPC that will be more likely to apply next year will be

the​ farthest-shifted PPC because there would be relatively more capital goods available to produce larger quantities of consumer goods next year.

Opportunity cost is defined as

the​ highest-valued, next-best alternative that must be given up to obtain something.

In determining how to allocate scarce land resources to automobile​ parking, individuals will incur an opportunity cost. That opportunity cost is

the​ next-highest-ranked alternative use of the space.

The ultimate purpose of economics is

to study how individuals make choices.

Proponents of behavioral economics suggest that traditional economic models assume that people exhibit all of the following​ "unrealistic" characteristics except

unbounded altruism.

A demand schedule shows

various quantities of a good or service demanded at various prices.

After the concert is over and you and your friend are traveling​ home, you discuss how each of you might otherwise have used the four hours devoted to attending the concert. The four hours could have been used to​ study, to watch a sporting event on​ TV, or to get some extra sleep. Your friend decides that if she had not spent four hours attending the​ concert, she would have chosen to​ study, and you reply that you otherwise would have watched the televised sporting event. The relevant opportunity costs for you and your friend for allocating four hours to attending the concert are

watching a sporting event on TV for you and studying for your friend.

A rational self-interested student decides whether to purchase a textbook required for a particular class based on all of the​ following, except

whether the textbook has an attractive dust jacket.

The division of labor refers to

workers being assigned specific tasks.

Economic growth implies

you can now have more of all goods.

You are investing your resources in a college education because

your personal PPC will grow faster by investing in human capital and you will be better off.

Ceteris Paribus means

​"other things​ constant."

Ron advertised his car for sale for​ $6000, although he was willing to accept​ $4000. When he finally sells his car for​ $5500, his producer surplus from the sale is

​$1500

As long as a price ceiling is​ ____ the market clearing​ price, imposing a price ceiling creates a​ ____.

​below; shortage

During the time period assumed by a production possibilities​ curve, it is​ ________ to be at a point outside the curve and​ ________ to be at a point beneath the curve.

​impossible; possible

If demand increases while supply remains​ unchanged, the equilibrium price of the product will​ ____ and the equilibrium quantity will ____.

​increase increase

Factors of production include

​land, labor, physical​ capital, human capital and entrepreneurship.

Price ceilings tend to​ ________ gains from​ trade, and price floors tend to​ ________ gains from trade.

​reduce; reduce

Evidence indicates that the group which benefits most from rent ceilings is

​upper-income professionals.

Consumer surplus at any specific quantity is measured as the​ ________ distance between the demand curve and the level of the market clearing​ ________.

​vertical; price

Producer surplus at any specific quantity is measured as the​ ________ distance between the supply curve and the level of the market clearing​ ________.

​vertical; price