ECO105 Final Exam Test 1
If we observe both an increase in the price of beach balls and a decrease in the quantity of beach balls bought and sold, a likely explanation is that the
supply of beach balls has decreased
Farmland can be used to produce either cattle or corn. If the price of cattle rises, the
supply of corn will decrease
A given percentage increase in the price of a product will cause a smaller percentage decrease in quantity demanded
the easier it is to find good substitutes
As you shift your time away form alternative uses in order to work,
the marginal cost of your time increases
Reading a demand curve "up and over" tells you
the maximum amount consumers are willing to pay for a given quantity
In a voluntary exchange,
the price must be greater than the marginal opportunity cost of the seller and less than the marginal benefit of the buyer
The "miracle of markets" is that
we get the products and services we want as a result of individual decisions made by complete strangers
When sellers expect a higher future price, then today's
supply decreases
It takes mom 30 minutes to cook dinner. In the same time, she can iron 6 shirts. Dad takes an hour to cook dinner and 30 minutes to iron a single shirt. In this situation
Dad should cook dinner; the opportunity cost is only 2 shirts
Which statement is true about marginal benefit?
For supply, marginal benefit is measured in dollars
Because of scarcity, we must give up some of one product in order to get more of another. This is the concept of
Opportunity Cost
Which cannot cause an increase in demand for a service?
a decrease in the price of a substitute
If Kraft Dinner is an inferior good, then a rise in the price of Kraft Dinner will cause a
decrease in the quantity demanded
For economists, the term wants and demands
do not mean the same thing
If an increase in price causes a decrease in total revenue, then price elasticity of demand is
greater than zero but less than one
If an increase in price causes an increase in total revenue, then price elasticity of demand is
greater than zero but less than one
Demand will be more elastic the
greater the fraction of income spent on the product/ service
People take their parents for granted because parents typically have
high total benefits and low marginal benefits
A decrease in the wages of farm workers who harvest coffee beans will
increase the supply of coffee
People who cannot find work during a recession often enroll in school. An economic explanation is that attending school during a recession has a
lower marginal opportunity cost
The high price of diamonds relative to the price of water is due to the fact that
marginal benefits from diamonds are relatively high
To hire an input, a business owner must pay a price that
matches the best opportunity cost of the input owner
At the equilibrium price, business inventories are
stable
Market supply is the
sum of quantities supplied by all businesses at each price
Market demand is the
sum of the quantities demanded by all individuals at each price