ECO 201

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made. A. government B. market C. firm D. business sector

A. government

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. A. normative statement B. budget constraint C. trade-off D. opportunity cost

A. normative statement

The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied. A. price B. demand C. supply D. quantity

A. price

The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending. A. business B. government C. household D. capital market

B. government

Figure 2-1 4. Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: A. A to B B. B to E C. C to F D. G to F

C. C to F

Scarcity exits because of: A. the market mechanism. B. specialization and division of labor. C. the allocation of goods by prices D. unlimited wants and limited resources.

D. unlimited wants and limited resources.

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is: A. no change; only the supply curve for beef is likely to be affected. B. a shift of the demand curve for beef to the left. C. a movement down along the demand curve for beef to the right. D. a shift of the demand curve for beef to the right.

B. a shift of the demand curve for beef to the left.

Any given demand or supply curve is based on the ceteris paribus assumption that ___________________. A. everything is variable. B. all else is held equal C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole.

B. all else is held equal

The term "ceteris paribus" means that: A. everything is variable. B. all variables except those specified are constant. C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole.

B. all variables except those specified are constant.

Many cooks view butter and margarine to be substitutes. If the price of butter rises, then in the market for margarine: A. the equilibrium price will fall and the equilibrium quantity will fall. B. both the equilibrium price and quantity will rise. C. the equilibrium price will rise and the equilibrium quantity will decrease. D. the equilibrium price will rise, while the change to equilibrium quantity is indeterminate.

B. both the equilibrium price and quantity will rise.

Demand is said to be ___________ when the quantity demanded is very responsive to changes in price. A. elastic B. unit elastic C. inelastic D. independent

A. elastic

The ___________ is the only price where quantity demanded is equal to quantity supplied. A. equilibrium price B. horizontal axis intercept C. vertical axis intercept D. market price

A. equilibrium price

Which of the following best describes a fiscal policy tool? A. government spending B. bank lending C. financial capital markets D. household spending

A. government spending

The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise: A. increasing the price of game tickets because demand is inelastic. B. not changing the price of game tickets because demand is unit elastic. C. increasing the price of game tickets because demand is elastic. D. decreasing the price of game tickets because demand is elastic.

A. increasing the price of game tickets because demand is inelastic.

Refer to Figure 5-1. Graph B represents a demand curve that is relatively __________. Total revenue __________ as the price decreases from $10 to $5. A. inelastic; decreases B. elastic; decreases C. elastic; increases D. inelastic; increases

A. inelastic; decreases

Which of the following best describes a monetary policy tool? A. interest rates B. taxes C. household savings D. government spending

A. interest rates

Since Baltimore passed the first _______________ in 1994, several dozen cities enacted similar laws in the late 1990s and into the 2000s. A. living wage law B. price ceiling C. price floor D. minimum wage

A. living wage law

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. A. market-oriented economy B. macroeconomy C. microeconomy D. command economy

A. market-oriented economy

When demand is inelastic: A. price elasticity of demand is greater than 1. B. consumers are not very responsive to changes in price. C. the percentage change in quantity demanded resulting from a price change is greater than the percentage change in price. D. demand curves appear to be fairly flat.

B. consumers are not very responsive to changes in price.

If the demand curve is perfectly elastic, then an increase in supply will: A. decrease the price but result in no change in the quantity exchanged. B. increase the quantity exchanged but result in no change in the price. C. increase the price but result in no change in the quantity exchanged. D. increase both the price and the quantity exchanged.

B. increase the quantity exchanged but result in no change in the price.

Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price. A. independent B. inelastic C. unit elastic D. elastic

B. inelastic

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization? A. division of labour B. international trade C. economies of scale D. command economy

B. international trade

Which of the following will not result in a rightward shift of the market supply curve for labor? A. a decrease in non-wage income B. an increase in the working-age population C. an increase in labor productivity D. an increase in immigration

C. an increase in labor productivity

Which of the following will not result in a leftward shift of the market demand curve for labor? A. a decrease in labor productivity B. a decrease in demand for the firm's product C. an increase in the wage rate D. a decrease in the firm's product price

C. an increase in the wage rate

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. A. personal preference B. utility level C. budget constraint D. opportunity set

C. budget constraint

Refer to Figure 3-2. A change from Point A to Point B represents a(n): A. increase in demand. B. decrease in demand. C. decrease in quantity demanded. D. increase in quantity demanded.

C. decrease in quantity demanded.

The labor ____________ curve(s) will shift _______________ if there is an increase in productivity or an increase in the demand for the final product. A. demand; left B. supply; left C. demand; right D. supply; right

C. demand; right

Which of the following is generally accepted as a valid criticism of the production of useful goods and services? A. government involvement B. the black market C. environmental pollution D. economic freedom

C. environmental pollution

In the ______________, households receive goods and services and pay firms for them. A. labor market B. financial capital market C. goods and services market D. savings market

C. goods and services market

Refer to Figure 3-1. Using the graph above and beginning on D1, a shift to D2 would indicate a(n): A. increase in quantity demanded. B. decrease in quantity demanded. C. increase in demand. D. decrease in demand.

C. increase in demand.

Improvements in the productivity of labor will tend to: A. decrease wages. B. decrease the supply of labor. C. increase wages. D. increase the supply of labor.

C. increase wages.

If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________. A. increases; remain constant B. increases, rise C. increases; fall D. decreases; fall

C. increases; fall

. In the ____________, households work and receive payment from firms. A. financial investment market B. financial capital market C. labor market D. savings market

C. labor market

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________. A. income gap B. market equilibrium C. law of demand D. price model

C. law of demand

When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being: A. balanced budget B. prudent monetary policy C. low inflation D. assuring competition between firms

C. low inflation

The demand curve for a typical good has a(n): A. negative slope because some consumers switch to other goods as the price rises. B. negative slope because consumer incomes fall as the price of the good rises. C. negative slope because the good has less "snob appeal" as its price falls. D. inverse slope because as the price goes up, the good has more profitability.

A. negative slope because some consumers switch to other goods as the price rises.

A demand curve shows the relationship between price and _________________ on a graph. A. quantity demanded B. quantity produced C. economies of scale D. costs

A. quantity demanded

As the _____________ complement for high-skill labor becomes cheaper, the demand curve for high-skill labor will shift to the right. A. technology B. low-skill labor C. market D. lower wage

A. technology

The opportunity cost of attending university is likely to include all except which of the following? A. the cost of haircuts received during the school term B. the income you forgo in order to attend classes C. tuition fees D. the cost of required textbooks

A. the cost of haircuts received during the school term

The marginal benefit of a slice of pizza is the: A. total amount that a consumer is willing to pay for a whole pizza, divided by the number of slices B. difference between the value of the slice to the consumer and the price of the slice. C. maximum amount that a consumer is willing to pay for the slice. D. price of the slice of pizza

C. maximum amount that a consumer is willing to pay for the slice.

Refer to Figure 5-1. With reference to Graph B, at a price of $5, total revenue equals: A. $150. B. $250. C. $300. D. $200.

D. $200.

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: A. $0 B. $4 C. $40 D. $44

D. $44

The United States has approximately ___________ credit card holders. A. 1.8 million B. 18 million C. 80 million D. 180 million

D. 180 million

Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is: A. Point B B. Point C C. Point D D. All points on the production possibilities frontier are equally efficient.

D. All points on the production possibilities frontier are equally efficient.

If a firm faces ________________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase. A. higher demand B. lower costs of production C. equilibrium D. a shift in demand

B. lower costs of production

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. A. utility B. marginal analysis C. the budget constraint D. consumption

B. marginal analysis

Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _____________. A. the recession B. new technologies C. the rise of global markets D. inflation

B. new technologies

But nearly all supply curves share a basic similarity: they slope _______________. A. down from left to right B. up from left to right C. up from right to left D. down from right to left

B. up from left to right

Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge. A. price ceiling laws B. usury laws C. price floor laws D. minimum interest rate

B. usury laws

In economics, the demand for a good refers to the amount of the good that people: A. would like to have if the good were free. B. will buy at various prices. C. need to achieve a minimum standard of living. D. will buy at alternative income levels.

B. will buy at various prices.

Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve? A. 0.1 B. 0.8 C. 1.0 D. 10.0

C. 1.0

In the United States, a typical credit card interest rate ranges from ______________ per year. A. .2% to .8% B. 2% to 8% C. 12% to 18% D. 22% to 28%

C. 12% to 18%

Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo's demand curve? A. 0.235 B. 2.00 C. 4.25 D. 6.33

C. 4.25

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________. A. demand schedule B. market price C. quantity supplied D. demand curve

C. quantity supplied

Macroeconomic topics do not usually include: A. the profit maximizing decisions of an individual manufacturer. B. the rate of inflation. C. the rate of unemployment. D. economic growth.

A. the profit maximizing decisions of an individual manufacturer.

A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result: A. total revenue will decrease. B. total revenue will increase. C. total revenue will remain constant. D. the elasticity of demand will increase.

A. total revenue will decrease.

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good. A. the production possibilities frontier B. allocative efficiency C. scarcity D. utility

A. the production possibilities frontier

Marginal thinking is best demonstrated by: A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. B. deciding to never purchase a coat made with animal skins or furs C. acquiring the information relevant to a choice before making that choice D. measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake

A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

. In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. A. division of labor B. interconnected economy C. task economy D. modern economy

A. division of labor

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern. A. utility B. marginal benefit C. opportunity cost D. sunk costs

A. utility

Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is: A. 8 points on the history exam. B. 15 points on the history exam. C. 14 points on the history exam. D. 17 points on the history exam.

B. 15 points on the history exam.

Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop? A. 0.15 B. 3.0 C. 0.10 D. 0.05

B. 3.0

In which of the following countries will the national government have the greatest influence with respect to the nation's economy? A. China B. Cuba C. Canada D. Chile

B. Cuba

In countries like _____________ the command economy predominates. A. China and Vietnam B. Cuba and North Korea C. South Africa and Kenya D. Germany and France

B. Cuba and North Korea

Which of the following best denotes the reason for the existence of substantial black markets? A. a market-oriented economy B. a command economy C. government laws and rules D. the microeconomy

B. a command economy

Scarcity implies that: A. consumers would be willing to purchase the same quantity of a good at a higher price. B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. C. at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce. D. consumers are too poor to afford the goods and services available.

B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

. A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ____________, shown on the horizontal axis. A. demand B. quantity C. quantity supplied D. quantity demanded

B. quantity

_________________ refers to the total number of units that are purchased at that price. A. quantity B. quantity demanded C. supply D. market quantity

B. quantity demanded

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to: A. rise and the equilibrium quantity to fall. B. rise and the equilibrium quantity to stay the same. C. rise and the equilibrium quantity to rise. D. stay the same and the equilibrium quantity to fall.

B. rise and the equilibrium quantity to stay the same.

In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers? A. wage levels B. the macroeconomy C. the firm's income D. household income

B. the macroeconomy

If new manufacturers enter the computer industry, then (ceteris paribus): A. the supply curve shifts to the left. B. the supply curve shifts to the right. C. the demand curve shifts to the left. D. some established manufacturers must exit the industry.

B. the supply curve shifts to the right.

Demand is said to be __________ when the quantity demanded changes at the same proportion as the price. A. elastic B. unit elastic C. inelastic D. independent

B. unit elastic

Refer to Figure 5-1. With reference to Graph A, at a price of $10, total revenue equals: A. $1,000. B. $500. C. $400. D. $200.

C. $400.

Refer to Figure 5-1. With reference to Graph A, at a price of $5, total revenue equals: A. $200. B. $400. C. $500. D. $1,000.

C. $500.

The demand for a product is unit elastic. At a price of $20, 10 units of a product are sold. If the price is increased to $40, then one would expect sales to equal: A. 20 units. B. 10 units. C. 5 units. D. 0 units.

C. 5 units.

Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is: A. 10 points on the economics exam B. 8 points on the history exam C. 7 points on the economics exam D. 12 points on the economics exam

C. 7 points on the economics exam

Why is there scarcity? A. Because the opportunity set determines this. B. Because theory dictates it. C. Because our unlimited wants exceed our limited resources D. Because human wants are limited.

C. Because our unlimited wants exceed our limited resources

The basic difference between macroeconomics and microeconomics is: A. microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. B. microeconomics concentrates on the behaviour of individual consumers while macroeconomics focuses on the behaviour of firms. C. microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. D. microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

C. microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

. Attending college is a case where the ________________ exceeds the monetary cost. A. budget constraint B. marginal analysis C. opportunity cost D. marginal utility

C. opportunity cost

The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in __________. A. quantity supplied B. the slope of the demand curve C. price D. the slope in the supply curve

C. price

In contrast to goods and services markets, _____________ are rare in labor markets, because rules that prevent people from earning income are not politically popular. A. minimum wages B. price floors C. price ceilings D. living wage laws

C. price ceilings

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases. A. quantity demanded, price B. quantity supplied, quantity demanded C. price, quantity demanded D. price, quantity supplied

C. price, quantity demanded

A straightforward example of a _______________, often used for simplicity, is the interest rate. A. price ceiling B. financial investment C. rate of return D. price floor

C. rate of return

The price elasticity of demand measures the: A. responsiveness of quantity demanded to a change in quantity supplied. B. responsiveness of price to a change in quantity demanded. C. responsiveness of quantity demanded to a change in price. D. responsiveness of quantity demanded to a change in income.

C. responsiveness of quantity demanded to a change in price.

As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left. A. high-skill labor B. lower wage C. technology D. market

C. technology

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is: A. nothing, because he enjoys playing basketball more than studying. B. the increase in skill he obtains from playing basketball for that hour. C. the benefit to his grades from studying for an hour D. nothing, because he had a free pass into the sports complex to play basketball.

C. the benefit to his grades from studying for an hour

When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________. A. the quantity demanded of financial capital at any given interest rate will remain unchanged. B. the quantity demanded of financial capital at any given interest rate will shift to the left. C. the quantity demanded of financial capital at any given interest rate will shift to the right. D. the quantity demanded of financial capital at any given interest rate will achieve equilibrium.

C. the quantity demanded of financial capital at any given interest rate will shift to the right.

If macroeconomics looks at the economy as a whole, it focuses on which of the following? A. households B. business firms C. unemployed people D. the division of labor

C. unemployed people

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages __________. A. will stay the same B. will decrease C. will increase D. may increase, decrease or stay the same depending on the relative slopes.

C. will increase

Which of the following statements most likely lies within the realm of microeconomics? A. Unemployment rises during a recession and falls during an expansion. B. An increase in government spending will increase the aggregate demand for goods and services in the economy. C. A rapid acceleration of the supply of money may create inflation. D. An increase in labor costs will increase the additional cost of producing another bus.

D. An increase in labor costs will increase the additional cost of producing another bus.

Refer to Figure 2-1. The most inefficient point depicted is: A. Point A B. Point C C. Point D D. Point G

D. Point G

Which of the following is most likely a topic of discussion in macroeconomics? A. an increase in the price of a hamburger B. a decrease in the production of DVD players by a consumer electronics company C. an increase in the wage rate paid to automobile workers Which of the following is most likely a topic of discussion in macroeconomics? D. a decrease in the unemployment rate

D. a decrease in the unemployment rate

Which of the following results in a rightward shift of the market demand curve for labor? A. a decrease in labor productivity B. a decrease in the firm's product price C. an increase in the wage rate D. an increase in demand for the firm's product

D. an increase in demand for the firm's product

The nature of demand indicates that as the price of a good increases: A. suppliers wish to sell less of it. B. more of it is produced. C. more of it is desired. D. buyers desire to purchase less of it.

D. buyers desire to purchase less of it.

A price cut will increase the total revenue a firm receives if the demand for its product is: A. unit inelastic. B. unit elastic. C. inelastic. D. elastic.

D. elastic.

The demand schedule for a good: A. indicates the quantity that people will buy at the prevailing price. B. indicates the quantities that suppliers will sell at various market prices. C. is determined primarily by the cost of producing the good. D. indicates the quantities that will be purchased at alternative market prices

D. indicates the quantities that will be purchased at alternative market prices

The opportunity cost of an action: A. can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action. B. can be determined by adding up the bills incurred as a result of the action. C. can be objectively determined only by economists. D. is a subjective valuation that can be determined only by the individual who chooses the action.

D. is a subjective valuation that can be determined only by the individual who chooses the action.

Other things being equal, a __________ supply of workers tends to __________ real wages. A. smaller; not change B. larger; increase C. smaller; decrease D. larger; decrease

D. larger; decrease

Price elasticity of demand is defined as: A. the slope of the demand curve. B. the slope of the demand curve divided by the price. C. the percentage change in price divided by the percentage change in quantity demanded. D. the percentage change in quantity demanded divided by the percentage change in price.

D. the percentage change in quantity demanded divided by the percentage change in price.

When quantity demanded decreases in response to a change in price: A. the demand curve shifts to the right. B. the demand curve shifts to the left. C. there is a movement down along the demand curve. D. there is a movement up along the demand curve.

D. there is a movement up along the demand curve.