ECON 102 HW/Quiz Questions
Illini Union Tech Zone sells two types of tablets, A and B. Suppose that a 20% increase in the price of tablet A causes a 50% decrease in the quantity demanded for tablet A, a 10% increase in the quantity demanded for tablet B. What is the own-price elasticity of demand for tablet A? If necessary, round to the nearest two decimal points. (4.2 HW)
-2.5
In the graph below supply curve is perfectly inelastic. What is the own-price elasticity of supply when we are on the market equilibrium price and price decreases by 15%? If necessary, round to the nearest two decimal points. (4.2 HW)
0
Illini Union Tech Zone sells two types of tablets, A and B. Suppose that a 20% increase in the price of tablet A causes a 50% decrease in the quantity demanded for tablet A, a 10% increase in the quantity demanded for tablet B. What is the cross-price elasticity of demand for tablet B with respect to the price of tablet A? If necessary, round to the nearest two decimal points. (4.2 HW)
0.5
Illini Union Tech Zone sells two types of tablets, A and B. Suppose that the university gives a refund to each student that amounts to 20% of their income. This increases the quantity demanded for tablet A by 10%, and decreases the quantity demanded for tablet B by 10%. What is the income elasticity of demand for tablet A? If necessary, round to the nearest two decimal points. (4.2 HW)
0.5
The following table describes the preferences of Robinson Crusoe who just arrived at an isolated island (There is an ordinal ranking in preferences where choice 1 is the highest priority). Now, he needs to take his first action. What is the opportunity cost of finding food? (3.1 HW) Choice : Number Task 1 : Find drinking water 2 : Find food 3 : Build a shelter 4 : Explore the island
1
Consider the following hypothetical market. The equilibrium price is $10 and the equilibrium quantity is 20 units. The own-price elasticity of demand is -0.5 and the own-price elasticity of supply is 0.75. If price increases from $10 to $12, what will be the new level of quantity demanded? (4.2 QUIZ)
18
How many lectures will maximize this student's utility? (3.1 HW) Number of Online Lectures: 1 2 3 4 Total Utility: 30 40 28 8 Marginal Utility: 30 10 -12 -20
2.0000
Consider the following hypothetical market. The equilibrium price is $10 and the equilibrium quantity is 20 units. The own-price elasticity of demand is -0.5 and the own-price elasticity of supply is 0.75. If price increases from $10 to $12, what will be the new level of quantity supplied?If necessary, round to the nearest two decimal points. (4.2 HW)
23
Fill the missing value of marginal utility (3.1 HW) Chicken Wings/Total Utility/Marginal Utility 1/10/10 3/20/?
5
Which of the following would cause a shift to the right of the supply curve for gasoline? (4.1 HW) I. A large increase in the price of public transportation. II. A large decrease in the price of automobiles. III. A large reduction in the costs of producing gasoline. a) II and III only b) I only c) II only d) III only
NOT a) II and III only
If income decreases from $25,000 to $20,000 and the quantity of sodas demanded increases from 240 to 250, then soda is a(n): (4.2 HW) a) Normal good b) Substitute good c) Inferior good d) Complementary good
NOT a) Normal good
Bill Bonecrusher graduates from college with a choice of playing professional football at $2 million a year or coaching for $50,000 a year. He decides to play football, but eight years later he quits football to make movies for $3 million a year. His opportunity cost at graduation was ________ and eight years later was ________. (3.1 QUIZ) a) $50,000; $2 million b) $2 million; $3 million c) $2 million; $2 million d) $50,000; $50,000
a) $50,000; $2 million
Jennifer is willing to sell 2 chairs for $10 each and 2 more for $20 each. Peter is willing to pay $15 for the first chair, $10 for the second chair, $5 for the third chair, and $0 for the fourth chair. How many chairs does Peter own after all transactions take place at the market-clearing price? (3.2 QUIZ) a) 2 b) 1 c) 0 d) 3
a) 2
Which of the following statements is FALSE? (4.1 HW) a) An increase in income causes the demand curve for an inferior good to shift to the right. b) An increase in income causes a decrease in the demand for an inferior good. c) A decrease in income causes the demand curve for a normal good to shift to the left. d) An increase in income causes an increase in the demand for a normal good.
a) An increase in income causes the demand curve for an inferior good to shift to the right.
You are analyzing the demand for good X. Which of the following will result in a shift to the right of the demand curve for X? (4.1 HW) a) An increase in the price of a good that is a substitute for X b) An increase in the price of a good that is a complement to good X c) A decrease in the price of X d) all of the above
a) An increase in the price of a good that is a substitute for X
Which of the following statements is TRUE about scarcity? (1.3 HW) a) Both rich and poor people face the problem of scarcity. b) Scarcity exists only when supply is insufficient to meet demand. c) Scarcity can be eliminated when a country becomes richer. d) Scarcity exists only when a shortage exists.
a) Both rich and poor people face the problem of scarcity.
Chris is willing to pay $5 for a sandwich. Subway sells sandwiches for $7. Should Chris buy the sandwich? (3.2 HW) a) No, the selling price is higher than his maximum buying price. b) Yes, he was willing to pay $5 before he saw the prices c) Yes, he is hungry and it sounds like a deal d) Not enough information.
a) No, the selling price is higher than his maximum buying price.
How could Adam Smith's comment about the butcher, the brewer, and the baker be accurately rephrased in modern terms? (2.2 QUIZ) a) The butcher, the brewer, and the baker give us our dinner because they each earn a living by doing so. b) The butcher, the brewer, and the baker give us our dinner because they view doing so as a public service. c) The butcher, the brewer, and the baker give us our dinner because they want to be well liked in the community. d) The butcher, the brewer, and the baker give us our dinner because they will be sued if they don't do so.
a) The butcher, the brewer, and the baker give us our dinner because they each earn a living by doing so.
How are the fundamental economic decisions determined in North Korea? (1.2 HW) a) The government decides because North Korea is a centrally planned economy. b) These decisions are made by the country's elders who have had much experience in answering these questions. d) The United Nations decides because North Korea is a developing economy. e) Individuals, firms, and the government interact in a market to make these economic decisions.
a) The government decides because North Korea is a centrally planned economy.
Which of the following is an example of a positive statement? (1.2 HW) a) When the price of an item increases, people respond by reducing their consumption of the item. b) All else equal, a teacher should award a higher grade if you study more hours for an economics test. c) It is too hot to go jogging. d) The government should balance the budget.
a) When the price of an item increases, people respond by reducing their consumption of the item.
Suppose we observe the following two simultaneous events in the market for beef. First, there is a decrease in the demand for beef due to changes in consumer tastes. And second, there is a reduction in supply due to cattle farmers selling their land to real estate developers. We know with certainty that these two simultaneous events will cause which of the following? (4.1 HW) a) a decrease in the equilibrium quantity and an indeterminate change in the equilibrium price b) an increase in the equilibrium quantity and in the equilibrium price c) no change in the equilibrium quantity and a reduction in the equilibrium price d) a decrease in the equilibrium quantity and an increase in the equilibrium price
a) a decrease in the equilibrium quantity and an indeterminate change in the equilibrium price
Opportunity costs arise from (3.1 QUIZ) a) choices. b) regrets. c) mistakes. d) taxes.
a) choices.
The decision about what goods and services will be produced made in a market economy is made by (1.2 HW) a) consumers and firms choosing which goods and services to buy or produce. b) producers deciding what society wants most. c) lawmakers in the government voting on what will be produced. d) consumers dictating to firms what they need most. e) workers deciding to produce only what the boss says must be produced.
a) consumers and firms choosing which goods and services to buy or produce.
Economists assume people behave rationally, which means that people (1.3 QUIZ) a) do not intentionally make decisions that make themselves worse off. b) always understand the consequences of their decisions. c) have the necessary information to always make correct decisions. d) never make a mistake.
a) do not intentionally make decisions that make themselves worse off.
The longer the time frame involved, the more likely it is that the demand will be relatively (4.2 HW) a) elastic. b) steep. c) flat. d) inelastic.
a) elastic.
The price of good A goes up. As a result, the demand for good B shifts to the left. From this we can infer that: (4.1 HW) a) goods A and B are complements. b) goods A and B are substitutes. c) good A is used to produce good B. d) good B is used to produce good A. e) none of the above
a) goods A and B are complements.
According to Adam Smith, (2.2 HW) a) government intervention in markets is not desirable because an invisible hand leads decisions made in pursuit of self-interest to unintentionally promote the social interest. b) in a market transaction buyers can either get what they want for less than they would be willing to pay or sellers can earn a profit, but both buyers and sellers can't gain simultaneously. c) politicians are well-equipped to regulate corporations and intervene in markets to improve market outcomes. d) when big corporations pursue their self-interest of maximum profit, they will inevitably conflict with social interest.
a) government intervention in markets is not desirable because an invisible hand leads decisions made in pursuit of self-interest to unintentionally promote the social interest.
Sarah gets a salary increase of 20 percent. Before her raise, she purchased 5 pounds of hamburger and 1 pound of beef stew a month. After her raise, she consumes 2 pounds of hamburger and 3 pounds of beef stew a month. If everything else is held constant, we know that (4.1 HW) a) hamburger is an inferior good and beef stew is a normal good for Sarah. b) both hamburger and beef stew are inferior goods for Sarah. c) both hamburger and beef stew are normal goods for Sarah. d) hamburger is a normal good and beef stew is an inferior good for Sarah.
a) hamburger is an inferior good and beef stew is a normal good for Sarah.
If the price of oil rises, producers of oil will (3.3. HW) a) increase the quantity of oil supplied. b) cut the price. c) supply less oil. d) leave the amount of oil supplied unchanged.
a) increase the quantity of oil supplied.
The concept of marginality is important in economics because (3.1 HW) a) individuals make decisions at the margin. b) large expenditures are the only factor influencing consumption. c) individuals make decisions based on tastes only. d) marginal decisions indicate a lack of importance.
a) individuals make decisions at the margin.
A rational individual will never consume a unit of a good if its (3.1 HW) a) marginal utility is negative. b) marginal utility is increasing. c) marginal utility is diminishing. d) marginal utility is less than average utility.
a) marginal utility is negative.
Typically, an individual takes only one newspaper from the bin because (3.1 HW) a) of the low marginal utility of additional newspapers. b) marginal utility increases with the first consumption of newspapers. c) total utility will rise with consumption of more than one newspaper. d) there are limited amounts of newspapers in the bin.
a) of the low marginal utility of additional newspapers.
The formal definition of price elasticity of demand is (4.2 HW) a) percentage change in quantity demanded divided by percentage change in price. b) change in quantity demanded divided by change in price. c) quantity demanded divided by price. d) quantity demanded multiplied by price and divided by 100.
a) percentage change in quantity demanded divided by percentage change in price.
When people donate money to a charity, they behave (1.3 HW) a) rationally if the act gives them satisfaction b) irrationally because the act does not benefit anyone c) in an unpredictable manner because the act involves no incentive d) in a way that only makes themselves worse off
a) rationally if the act gives them satisfaction
If the price of automobiles were to increase substantially, the demand curve for gasoline would most likely (4.1 HW) a) shift leftward. b) become steeper. c) shift rightward. d) remain unchanged.
a) shift leftward. I THINK**
A demand curve for a normal good (4.1 HW) a) shows the inverse relationship between price and quantity demanded. b) is constructed based on the assumption that an inverse relationship exists between price and income. c) is constructed based on the assumption that income is rising. d) slopes upward and to the right.
a) shows the inverse relationship between price and quantity demanded.
Inelastic demand implies (4.2 HW) a) that a one percent increase in price results in a smaller than one percent decrease in quantity demanded. b) that a one percent decrease or increase in price induces no change in total revenue. c) that a one percent increase in price results in a larger than one percent decrease in quantity demanded. d) that a one percent cut in price results in a larger than one percent increase in quantity demanded.
a) that a one percent increase in price results in a smaller than one percent decrease in quantity demanded.
Holding all variables constant but one and assessing the impact of the one variable that has changed is an example of using (3.3 QUIZ) a) the ceteris paribus assumption. b) an economic model based on unrealistic assumptions. c) an untestable proposition. d) a flawed economic model.
a) the ceteris paribus assumption.
Scarcity refers to (1.3 QUIZ) a) the inability of society to satisfy all human wants because of limited resources. b) the ability of society to consume all that it produces. c) the inability of society to eliminate poverty. d) the ability of society to employ all of its resources.
a) the inability of society to satisfy all human wants because of limited resources.
Sugar can be refined from sugar beets. When the price of those beets falls, (4.1 QUIZ) a) the supply curve for sugar would shift right. b) the demand curve for sugar would shift left. c) the supply curve for sugar would shift left. d) the demand curve for sugar would shift right.
a) the supply curve for sugar would shift right.
Market demand is (3.3 QUIZ) a) the total quantities demanded of all consumers of a particular item at given prices. b) the demand for and supply of a good or service. c) total equilibrium demand for the market. d) a movement along the demand curve in response to the market.
a) the total quantities demanded of all consumers of a particular item at given prices.
Suppose you have four choices—go to a movie, read a book, watch television, or go to a concert. You choose to go to a movie. The opportunity cost of the movie is (3.1 HW) a) the value of the activity that you would have selected if you hadn't gone to the movie. b) the value of the television program not watched. c) the value of the concert that you didn't attend. d) the value of the book not read.
a) the value of the activity that you would have selected if you hadn't gone to the movie.
If equilibrium is achieved in a competitive market (4.3 QUIZ) a) there is no deadweight loss. b) the deadweight loss will equal the sum of consumer surplus and producer surplus. c) the deadweight loss will be maximized. d) the deadweight loss will be the same as the opportunity cost of the last unit of output sold.
a) there is no deadweight loss.
The problem of economic scarcity applies (1.3 HW) a) to economic systems in all nations, regardless of their level of development. b) only in economic systems that are just beginning to develop, because specialized resources are scarce in developing nations. c) only in industrially developed countries, because resources are scarce in these nations. d) only in underdeveloped countries, because there are no productive resources in these nations.
a) to economic systems in all nations, regardless of their level of development.
The idea that social order requires government planning__________: (2.1 HW) a) was supported by the Mercantilists b) is supported by strong historical evidence c) was supported by the Greek philosopher Aristotle
a) was supported by the Mercantilists
If the price of automobiles were to decrease substantially, the demand curve for automobiles would most likely (4.1 HW) a) shift leftward. b) remain unchanged. c) shift rightward. d) become steeper.
b) remain unchanged.
John has an economics test tomorrow. He must study and has planned the rest of his day so that he can fit some study time in. He has decided to go to the gym and then study for several hours. Which of the following statements is true? (1.3 HW) a) John did not use the economic way of thinking because his decision on how to allocate his time did not involve money. b) John's decision on how to allocate his time is consistent with the rationality assumption since the decision is intended to make him better off. c) John's decision does not involve his pursuit of self-interest. d) John's decision on how to allocate his time is inconsistent with the rationality assumption since he has decided to go to the gym.
b) John's decision on how to allocate his time is consistent with the rationality assumption since the decision is intended to make him better off.
Barbara is willing to sell an old couch for no less than $50. Chris offers $30. Should Barbara sell the couch? (3.2 HW) a) Yes. $30 is better than $0 b) No, because the price offered is below her minimum selling price. c) No, because Chris is lying about the value of the couch. d) Yes, it's an old couch
b) No, because the price offered is below her minimum selling price.
In the article "I, Pencil," what is mentioned as the force that directs the economic activity of our society? (1.1 QUIZ) a) Government agencies such as the Federal Reserve and the Bureau of Economic Analysis b) The Invisible Hand c) Traditional American small business owners d) Corporate executives who innovate and create jobs
b) The Invisible Hand
Which of the following statements is a positive economic statement? (1.2 HW) a) The Congress should pass the president's tax package. b) The President's budget included an increase in unemployment insurance payments. c) Tax rebates always give too much favor to rich people. d) none of the above
b) The President's budget included an increase in unemployment insurance payments.
Which of the following would NOT affect a good's price elasticity of demand? (4.2 HW) a) The ease of substitution between goods b) The cost of producing the good c) The proportion of one's budget spent on an item d) The number of substitute goods available
b) The cost of producing the good
Steven lives in a big city where there is a shortage of parking. He has a parking spot in his driveway where he parks his car. Which of the following statements is most correct? (3.1 QUIZ) a) Steven has a lower opportunity cost of owning a car than his neighbor, who must rent a parking spot. b) The opportunity cost of using the parking spot is the price he could charge someone else for using the spot. c) The opportunity cost of using the spot is zero, because Steven owns the house. d) The opportunity cost depends on how much Steven's mortgage payment is.
b) The opportunity cost of using the parking spot is the price he could charge someone else for using the spot.
Which of the following is a valid argument against the labor theory of value? (2.2 HW) a) "Free gifts from nature" are still scarce, so they are not truly free, and the labor theory of value does not account for this natural cost b) There is no objective way to compare or add the "amount" of labor across different people with different skills c) As a subjective theory, the labor theory of value fails to solve the water-diamonds paradox d) Cars are made from other inputs besides just labor, such as steel and rubber
b) There is no objective way to compare or add the "amount" of labor across different people with different skills
What is one purpose of [Read's] mail delivery example [in "I, Pencil"]? (1.1 QUIZ) a) To show a case where the benefits of government activity outweigh the costs b) To show how the existence of a government monopoly leads people to assume that an activity could not be done by individuals acting freely c) This is a trick question; this essay does not mention mail delivery d) To offer another more complex example in which "nobody knows how to do it" but it gets done anyway through the free market
b) To show how the existence of a government monopoly leads people to assume that an activity could not be done by individuals acting freely
The threat of a large fine for failure to pay income taxes is an example of (1.3 HW) a) the ineffectiveness of incentives to get people to pay their taxes. b) a negative incentive to get all people to pay taxes. c) the excessive power of the Internal Revenue Service. d) people failing to consider all the benefits the government provides them.
b) a negative incentive to get all people to pay taxes.
In every economic system, choices must be made because resources (1.3 HW) a) are unlimited, but human desires and wants are limited. b) are limited, but human desires and wants are unlimited. c) are limited, and so are human desires and wants. d) are unlimited, and so are human desires and wants
b) are limited, but human desires and wants are unlimited.
In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, economist Adam Smith argued that individuals (2.2 HW) a) always consider the impact of their actions on the welfare of others. b) are motivated by self-interest. c) always tend to act in an altruistic manner. d) are generally not concerned with economic questions.
b) are motivated by self-interest.
The marginal utility of the first cup of coffee that Tom drinks in the morning is worth $2.00. The marginal utility of the 9th cup of coffee he drinks is positive while the marginal utility of the 10th cup of coffee he drinks in the morning is worth $0. This implies that at a price of $0, Tom would drink (3.1 HW) a) zero cups of coffee per morning. b) at most 10 cups of coffee per morning. c) more than 10 cups of coffee per morning, but the actual number is indeterminate from this information. d) an infinite number of cups of coffee each morning.
b) at most 10 cups of coffee per morning.
Fred and Ann both decide to see the same movie when they are given free movie tickets. We know that (3.1 HW) a) both bear the same opportunity cost since they are doing the same thing. b) both bear an opportunity cost since they could have done other things instead of see the movie. c) the cost of going to the movie is greater for the one who had more choices to do other things. d) neither bears an opportunity cost because the tickets were free.
b) both bear an opportunity cost since they could have done other things instead of see the movie.
Self-interest relates to (1.3 QUIZ) a) the ceteris paribus assumption. b) both monetary and nonmonetary objectives. c) only monetary objectives. d) normative economic analysis and not positive economic analysis.
b) both monetary and nonmonetary objectives.
The decrease in consumer surplus and producer surplus that results from an inefficient level of production is called the (4.3 HW) a) big tradeoff. b) deadweight loss. c) external cost. d) external benefit.
b) deadweight loss.
Positive statements can contain (1.2 HW) a) logical arguments mixed with statements of opinion. b) facts and predictions. c) opinions and conditions. d) a mixture of facts and opinions.
b) facts and predictions.
A mixed economic system is best described an economy with a mix of (1.2 HW) a) for-profit organizations and not-for-profit organizations. b) free markets and government control. c) domestic and foreign buyers. d) state and federal governments.
b) free markets and government control.
Holding supply constant, an increase in demand leads to (4.1 QUIZ) a) higher prices and lower quantity supplied. b) higher prices and higher quantity supplied. c) lower prices and higher quantity supplied. d) lower prices and lower quantity supplied.
b) higher prices and higher quantity supplied.
An improvement in technology in the production of computers would (4.1 HW) a) decrease the demand for computers. b) increase the supply of computers. c) increase the demand for computers. d) decrease the supply of computers.
b) increase the supply of computers.
A theory or a model (1.2 HW) a) captures all aspects of the real world. b) is a simplified, abstract view of reality. c) is a detailed analysis of what ought to be. d) is based on each economist's value judgments.
b) is a simplified, abstract view of reality
Adam Smith: (2.2 QUIZ) a) introduced the concept of ceteris paribus to the discussion of supply and demand. b) is considered the founder of economics. c) is responsible for refining the model of supply and demand.
b) is considered the founder of economics.
Refer to Figure 6.10. The current price of a turkey sandwich is $6. If Kyle is currently buying nine turkey sandwiches a week, he ________ maximizing utility because the marginal utility ________ than its price. (3.1 HW) a) is; from the ninth sandwich is greater b) is not; gained from the ninth sandwich is less c) is; from the ninth sandwich is less d) is not; gained from the ninth sandwich is greater
b) is not; gained from the ninth sandwich is less
In economic analysis, people's resources are (1.3 HW) a) unlimited and their wants are limited. b) limited and their wants are unlimited. c) unlimited and their wants are also unlimited. d) limited and their wants are also limited.
b) limited and their wants are unlimited.
According to __________, money constitutes real wealth for a nation (2.1 QUIZ) a) Adam Smith b) mercantilism c) Aristotle d) none of the above
b) mercantilism
After the price of music downloads falls, Phil buys fewer CDs and buys a new MP3 player. For Phil, (4.1 QUIZ) a) music downloads, MP3 players, and CDs are all substitutes. b) music downloads and CDs are substitutes, and music downloads and MP3 players are complements. c) music downloads, MP3 players, and CDs are all complements. d) music downloads and CDs are complements, and MP3 players and CDs are substitutes
b) music downloads and CDs are substitutes, and music downloads and MP3 players are complements.
"If A occurs then B will follow" is a (1.2 HW) a) normative statement. b) positive statement. c) non-testable statement. d) statement lacking in logic.
b) positive statement.
Economists assume that people are motivated by (1.3 QUIZ) a) benevolence. b) rational self-interest. c) altruism. d) greed.
b) rational self-interest.
The goods and services that can be purchased with a certain amount of money is called its _____ value: (2.1 HW) a) nominal b) real c) equivalent d) marginal
b) real
To protect the cod fishery off the northeast coast of the U.S., the federal government may limit the amount of fish that each boat can catch in the fishery. The result of this public policy is to: (4.1 HW) a) shift the cod supply curve to the right. b) shift the cod supply curve to the left. c) shift the cod demand curve to the right. d) shift the cod demand curve to the left.
b) shift the cod supply curve to the left.
According to the Law of Demand, the demand curve for a good will (4.1 HW) a) slope upward. b) slope downward. c) shift leftward when the price of the good increases. d) shift rightward when the price of the good increases.
b) slope downward.
The core idea of Mercantilism was ______: (2.1 QUIZ) a) exchange is a positive-sum game b) that government is required for social order c) that the amount of goods determines the wealth of a nation d) the exchange of equivalents theory
b) that government is required for social order
Other things being equal, an increase in the price of a good leads to an increase in the amount produced. This is known as (3.3 HW) a) equilibrium. b) the law of supply. c) ceteris paribus. d) the law of demand.
b) the law of supply.
Other things being constant, the only way to move along a given supply curve for a product is for (4.1 HW) a) the number of sellers to change. b) the product's relative price to change. c) technological changes to occur. d) the future relative price of related goods to change.
b) the product's relative price to change.
A demand relationship in which the quantity demanded changes exactly in proportion to the change in price is (4.2 HW) a) inelastic. b) unit-elastic. c) consistent with zero elasticity. d) elastic.
b) unit-elastic.
In economics, another term for satisfaction is (3.1 QUIZ) a) price elasticity. b) utility. c) marginal productivity. d) income elasticity.
b) utility.
When demand is perfectly inelastic, the demand curve is (4.2 HW) a) downward sloping. b) vertical. c) upward sloping. d) horizontal.
b) vertical. I THINK
The price system features (4.3 HW) a) exchanges made only on a barter basis. b) voluntary exchange that makes both the consumer and producer better off. c) an exchange in which consumer is made better off and the producer is made worse off. d) exchanges made in currency only.
b) voluntary exchange that makes both the consumer and producer better off.
Suppose that when the price of milk rises 20%, the quantity demanded of milk falls 10%. Based on this information, what is the approximate absolute price elasticity of demand for milk? (4.2 HW) a) 0.05 b) 0.2 c) 0.5 d) 2.0
c) 0.5 I THINK
Suppose that the cross price elasticity of demand between goods A and B equals 1.5. Which of the following is TRUE? (4.2 QUIZ) a) A and B are complements because the cross price elasticity is greater than one. b) A and B are substitutes because the cross price elasticity is greater than one. c) A and B are substitutes because the cross price elasticity is positive. d) A and B are complements because the cross price elasticity is positive.
c) A and B are substitutes because the cross price elasticity is positive.
If income increases from $20,000 to $25,000 and the quantity of frozen meatballs demanded decreases from 150 to 100, then frozen meatball is a(n): (4.2 HW) a) Complementary good b) Normal good c) Inferior good d) Substitute good
c) Inferior good
What does the [Leonard Read] argue is the proper role of "society's legal apparatus" in economic activity? (1.1 HW) a) Delivering mail b) Regulating monopolies c) Removing obstacles to creative activity d) Nothing; he argues that there should be no laws
c) Removing obstacles to creative activity
Suppose we have two goods, tea and coffee. If the price of tea increases by 10% then the quantity demanded of coffee increases by 20%. Then tea is a ______ for coffee. (4.2 HW) a) Inferior good b) Complement c) Substitute d) Normal good
c) Substitute
Rare earth metals are used to manufacture some important electronic components in popular products like cell phones. These metals are not really rare, but they are expensive to extract from the ground. What happens to the market for the rare earth metals if these extraction costs increase? (4.1 HW) a) Supply curve shifts rightward b) Demand curve shifts leftward c) Supply curve shifts leftward d) Demand curve shifts rightward
c) Supply curve shifts leftward
What is the "iron law of wages"? (2.2 HW) a) A law that prohibits an employer from paying below a certain legal minimum wage b) The idea that a nation's prosperity depends on the quantity of metals (e.g. iron, copper, gold) it owns c) The theory that the price of labor is determined by the cost of human subsistence and reproduction d) The principle that people's wages tend to equalize over time
c) The theory that the price of labor is determined by the cost of human subsistence and reproduction
What led the Classical economists to reject the subjective theory of price? (2.2 QUIZ) a) The theory of marginal utility b) The exchange of equivalents theory c) The water-diamonds paradox d) None of the above; they did not reject the subjective theory of price
c) The water-diamonds paradox
Suppose Chris has a vase for sale. His minimum selling price is $100. Barbara is looking for a vase for her living room. Her maximum buying price is X. Which of the following is correct? (3.2 HW) a) If X <$100, then Chris and Barbara can trade. b) If X =$100, then Chris and Barbara cannot trade. c) X must be at least $100 for trade to take place. d) If X ≥ $100, then no trade will take price.
c) X must be at least $100 for trade to take place.QUI
In 1985, Alice paid $20,000 for an option to purchase ten acres of land. By paying the $20,000, she bought the right to buy the land for $100,000 in 1992. When she acquired the option in 1985, the land was worth $120,000. In 1992, it is worth $110,000. Should Alice exercise the option and pay $100,000 for the land? (3.1 HW) a) It depends on what the rate of interest was. b) It depends on what the rate of inflation was between 1985 and 1992. c) Yes. d) No.
c) Yes.
Marginal utility is the ________ satisfaction gained by consuming ________ of a good. (3.1 HW) a) total; one more unit b) total; all units c) additional; one more unit d) additional; all units
c) additional; one more unit
Suppose a market were currently at equilibrium. A rightward shift of the supply curve would cause a(n) (4.1 QUIZ) a) increase in price but a decrease in quantity. b) decrease in both price and quantity. c) decrease in price but an increase in quantity. d) increase in both price and quantity.
c) decrease in price but an increase in quantity.
The law of demand implies that the demand curve (3.3 HW) a) has a positive slope. b) shifts to the right when the price of a good increases. c) has a negative slope. d) shifts to the left when the price of a good decreases.
c) has a negative slope.
Human beings (1.3 HW) a) think they have unlimited wants, but really have limited needs. b) know what their needs are, but do not know what their wants are. c) have unlimited wants. d) have limited wants, but unlimited needs.
c) have unlimited wants.
The greater is the absolute price elasticity of demand, the (4.2 QUIZ) a) larger is the income of the buyer. b) smaller is the responsiveness to a price change. c) larger is the responsiveness of quantity demanded to the price change. d) higher is the change in demand to an income change.
c) larger is the responsiveness of quantity demanded to the price change.
As the price of a good increases, the change in the quantity demanded can be shown by (4.1 HW) a) moving right along the same demand curve. b) shifting the demand curve rightward. c) moving left along the same demand curve. d) shifting the demand curve leftward.
c) moving left along the same demand curve.
If someone complains that she doesn't feel very well because she ate too much pizza, we would conclude that the marginal utility of the last piece of pizza eaten was (3.1 HW) a) positive. b) very large. c) negative. d) zero.
c) negative.
The face value of money or income is called its ________ value. (2.1 QUIZ) a) real b) external c) nominal d) marginal
c) nominal
The saying that "You cannot have your cake and eat it too" illustrates the economic concept of (3.1 HW) a) physical capital. b) a positive statement. c) opportunity cost. d) a normative statement.
c) opportunity cost.
An inelastic demand indicates that (4.2 QUIZ) a) quantity demanded does not vary with changes in the price. b) relatively large changes in quantity demanded lead to relatively large changes in price. c) relatively large changes in price are required to obtain a relatively small change in quantity demanded. d) relatively small changes in price lead to relatively large changes in quantity demanded.
c) relatively large changes in price are required to obtain a relatively small change in quantity demanded.
Scarcity arises because (1.3 HW) a) international companies are slow to explore for new resources. b) import taxes depress the rate of growth of goods and services production. c) resources are finite and are inadequate to meet all human wants and needs. d) many countries waste goods because of inefficient political systems.
c) resources are finite and are inadequate to meet all human wants and needs.
Suppose Brad Pitts and Angelina Jolie wear matching platinum jewelry in their new movie. After the movie is released, suppose that consumers increase their demand for the jewelry and at the same time manufacturers increase the supply of the jewelry. As a result, (4.1 QUIZ) a) the equilibrium price and quantity will both decrease. b) the equilibrium quantity and price are both indeterminate. c) the equilibrium quantity will increase, and there is an indeterminate change in the equilibrium price. d) the equilibrium quantity will decrease, and the equilibrium price will increase.
c) the equilibrium quantity will increase, and there is an indeterminate change in the equilibrium price.
You rent a DVD of The Dark Knight Rises. The rental is for seven days and you watch the movie on the first day. You tell a friend about the film and your friend asks to come over and watch the movie with you before it is due back. What is your opportunity cost if you decide to watch the movie a second time instead of going to a football game? (3.1 HW) a) the entire cost of the movie rental, since you have already watched the movie b) one half the rental cost, because you have already watched the movie one time c) the football game you forego by watching the movie again d) The answer depends on how much you liked the movie in the first place.
c) the football game you forego by watching the movie again
The opportunity cost of attending college might best be described as (3.1 HW) a) the money that must be paid in order to attend college. b) the lowest-valued alternative use of the student's time and money. c) the highest-valued alternative use of the student's time and money. d) the value that the student attaches to not working.
c) the highest-valued alternative use of the student's time and money.
Marginal utility can be thought of as (3.1 QUIZ) a) the total satisfaction from buying all units of a good. b) the additional cost of that next good purchased. c) the incremental change in a person's total satisfaction level from buying the next unit of a good. d) the opportunity cost of buying the next good.
c) the incremental change in a person's total satisfaction level from buying the next unit of a good.
Olga buys a bag of potato chips every day after her economics class. The first potato chip always tastes wonderful. The second does not taste quite as good as the first. The third does not taste quite as good as the second. Olga is experiencing (3.1 HW) a) the income effect. b) irrational behavior. c) the law of diminishing marginal utility. d) the substitution effect.
c) the law of diminishing marginal utility.
Which of the following observations would refute an intrinsic theory of value? (2.2 HW) a) When the price of steel increases, the price of cars increases b) Tom Cruise gets paid more on average per movie than Chris Evans c) A Big Mac (hamburger) sells for the same price in New York as it does in Los Angeles d) After DVDs and DVD players became commonplace, the price of VHS tapes decreased significantly
d) After DVDs and DVD players became commonplace, the price of VHS tapes decreased significantly
Which of the following is a determinant of the price elasticity of demand for an item? (4.2 HW) a) The availability of a close substitute for the item b) The amount of time available to adjust to a change in the price of the item c) The percentage of a consumers budget allocated to expenditures on the item d) All of the above are correct
d) All of the above are correct
Which of the following statements is FALSE about the demand curve? (4.1 HW) a) When only the price of a good changes, there is movement along the demand curve but no change in demand. b) When demand decreases, there is a drop in the quantity demanded at each price. c) A change in demand is graphically shown by shifting the entire demand curve. d) An increase in demand shifts the demand curve to the left, closer to the price axis.
d) An increase in demand shifts the demand curve to the left, closer to the price axis.
Which of the following is the correct way to describe equilibrium in a market? (4.3 QUIZ) a) At equilibrium, demand equals supply. b) At equilibrium, market forces no longer apply. c) At equilibrium, scarcity is eliminated. d) At equilibrium, quantity demanded equals quantity supplied.
d) At equilibrium, quantity demanded equals quantity supplied.
Which of the following describes the labor theory of value? (2.2 HW) a) The theory that the price of a good is determined by its cost of production b) The theory that the price of a good is determined by its utility c) The theory that the price of a good is determined by the amount of labor used to produce it d) Both A and C
d) Both A and C
Jennifer is willing to sell 2 chairs for $10 each and 2 more for $20 each. Peter is willing to pay $15 for the first chair, $10 for the second chair, $5 for the third chair, and $1 for the fourth chair. What is the maximum buying price of the fifth chair? (3.2 QUIZ) a) $5 b) $15 c) $1 d) Not enough information
d) Not enough information
What is the [Leonard Read's] concluding argument [in "I, Pencil"]? (1.1 HW) a) That pencils are more complicated than you think b) That a pencil serves as a symbol that "simple is beautiful" c) That we must always remember that economics has a finite scope, and outside of that, natural explanations fail us ("only God can make a tree.") d) That the freedom to spontaneously cooperate is superior to central planning
d) That the freedom to spontaneously cooperate is superior to central planning
Normative economics involves (1.2 HW) a) a statement of "what is." b) a statement of fact. c) a statement that is purely descriptive. d) a statement of "what should be."
d) a statement of "what should be."
One major assumption of economics is that people (1.3 HW) a) always pursue the interests of others. b) are sometimes rational and sometimes irrational. c) behave randomly without any predictable pattern. d) act as if they systematically pursue self-interest.
d) act as if they systematically pursue self-interest.
When economists refer to people making decisions at the margin, they mean that we compare ________ benefits with ________ costs. (3.1 HW) a) total; incremental b) total; total c) additional; marginal d) additional; additional
d) additional; additional
Suppose that goods X and Y are substitutes and the price of good Y falls. We would then expect (4.1 HW) a) an increase in the demand for good X and a decrease in the quantity of good Y demanded. b) the quantity of good Y demanded to increase and the demand for good X to increase also. c) an increase in the demand for both good X and good Y. d) an increase in the quantity demanded of good Y and a decrease in the demand for good X.
d) an increase in the quantity demanded of good Y and a decrease in the demand for good X.
An increase in demand and an increase in supply will lead to (4.1 HW) a) unambiguous increases in both price and quantity. b) unambiguous decreases in both price and quantity. c) an unambiguous increase in price, but the effect on quantity is indeterminate. d) an unambiguous increase in quantity, but the effect on price is indeterminate.
d) an unambiguous increase in quantity, but the effect on price is indeterminate.
Economists assume that individuals (1.3 HW) a) behave in unpredictable ways. b) will never take actions to help others. c) prefer to live in a society that values fairness above all else. d) are rational and respond to incentives.
d) are rational and respond to incentives.
A seller will not sell _______ her _______. (3.2 HW) a) below; maximum selling price b) above; maximum selling price c) above; minimum selling price d) below; minimum selling price
d) below; minimum selling price
Mercantilists believed that trade is______: (2.1 HW) a) a situation where one party wins and the other loses b) a zero-sum game c) a positive-sum game d) both A and B are correct
d) both A and B are correct
Trade is a _________: (2.1 HW) a) zero-sum game b) positive-sum game c) mutually beneficial exchange d) both B and C are correct
d) both B and C are correct
"Wants" as an economic concept includes (1.3 HW) a) only the desire for luxury goods. b) only the purchase of necessary basic goods. c) only those goods that can be purchased with one's paycheck. d) both material and nonmaterial desires
d) both material and nonmaterial desires
If the cross price elasticity of demand between two goods is negative, then the two goods are (4.2 HW) a) independent. b) substitutes. c) unrelated. d) complements.
d) complements.
Demands differ from wants because (3.3 HW) a) wants require a plan to acquire a good but demands require no such plan. b) wants imply a decision about which demands to satisfy, while demands involve no specific plan to acquire the good. c) demands are unlimited, whereas wants are limited by income. d) demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good.
d) demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good.
Marginal utility is measured as (3.1 HW) a) extra output divided by extra utility. b) utility per unit of production. c) output of a good or service divided by price. d) extra utility from each additional good consumed.
d) extra utility from each additional good consumed.
A perfectly elastic demand curve is (4.2 HW) a) a downward sloping straight line. b) vertical. c) a rectangular hyperbola. d) horizontal.
d) horizontal. I THINK
The extra benefit resulting from a small increase in an activity is called the: (3.1 HW) a) marginal cost. b) opportunity cost. c) diminishing returns of the activity. d) marginal benefit.
d) marginal benefit.
Government planning ___________: (2.1 HW) a) is required for social order b) cannot create chaos c) both A and B are correct d) none of the above
d) none of the above
Spontaneous order________: (2.1 QUIZ) a) helps us distinguish nominal and real value of money b) was supported by Mercantilists c) is an example which confirms that social order requires government planning d) none of the above
d) none of the above
Ceteris paribus, as the price of a good or service increases, (3.3 HW) a) people will want less of it. b) people will buy more of it. c) people will want more of it. d) people will buy less of it.
d) people will buy less of it.
If real salaries increase but nominal salaries do not, this means that: (2.1 HW) a) prices have risen. b) the purchasing power of money has decreased. c) prices have not changed. d) prices have fallen.
d) prices have fallen.
When people donate money to a charity, they behave (1.3 HW) a) irrationally because the act does not benefit anyone. b) in an unpredictable manner because the act involves no incentive. c) in a way that only makes themselves worse off. d) rationally if the act gives them satisfaction
d) rationally if the act gives them satisfaction
The real value of money: (2.1 QUIZ) a) is another word for the face value. b) matters less to people than its nominal value. c) is the same as its nominal value. d) reflects the purchasing power of money.
d) reflects the purchasing power of money.
Assume that steak and potatoes are complements. When the price of steak goes up, the demand curve for potatoes: (4.1 QUIZ) a) shifts to the right initially and then returns to its original position. b) shifts to the right. c) remains constant. d) shifts to the left.
d) shifts to the left.
The price elasticity of demand is a measure of (4.2 HW) a) the demand for a product holding prices constant. b) the quantity demanded of a good at a given price. c) the horizontal shift in the demand curve when the price of a good changes. d) the responsiveness of the quantity demanded of a good to a changes in the price of the good.
d) the responsiveness of the quantity demanded of a good to a changes in the price of the good.
According to the exchange of equivalents theory________: (2.1 HW) a) nominal value of money and real value of money can be equivalent under certain circumstances b) trade is a positive-sum game c) trade will not happen if both parties value the goods equally d) when a trade happens it means both parties value the goods equally
d) when a trade happens it means both parties value the goods equally
Consider the following economic agents: a. the government b. consumers c. producers Who, in a market economy, decides what goods and services will be produced with the scarce resources available in that economy? (1.2 HW) a) the government, consumers and producers b) consumers c) the government d) producers e) consumers and producers
e) consumers and producers