Econ 202 Exam 1

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Quantity supplied refers to the amount of a good or service that a firm is willing and able to supply at a given price. A. True B. False

Which of the following are assumptions of economics A. Scarcity. B. Tradeoffs. C. Opportunity costs. D. All of the above. E. A and B above.

Economic decline (negative growth) is represented on a production possibilities frontier model by the production possibility frontier A. becoming steeper. B. shifting inward. C. shifting outward. D. becoming flatter.

Market equilibrium occurs where supply equals demand. A. True B. False

Utility refers to how much consumers utilize a product or service. A. True B. False

The best alternative use of a resource is referred to as its: A. market price. B. marginal utility. C. opportunity cost. D. sunk cost.

Advantages of trade include that A. It permits specialization. B. It can improve economic performance. C. It generally benefits both parties. D. All of the above.

When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent. This indicates that the demand for tortilla chips is A. perfectly inelastic. B. unit elastic. C. elastic. D. inelastic.

Every society faces trade-offs because we live in a world of scarcity. Suppose a student-athlete has the opportunity to earn $400 comma 000400,000 next year playing for a minor league baseball team, $500 comma 000500,000 next year playing for a European professional football team, or $0 returning to college for another year. The opportunity cost of the student-athlete returning to college next year is_________(number)

500,000

A change in all of the following variables will change the market demand for a product except A. the price of the product. B. tastes. C. population and demographics. D. income.

A consumer has $100 to spend on tables and chairs. If his income increases to $200, the prices of the goods remaining unchanged, his budget constraint: A. shifts outward. B. pivots inward along the vertical axis. C. shifts inward. D. pivots outward along the horizontal axis.

A decrease in the equilibrium price for a product will result A. when there is an increase in supply and a decrease in demand for the product. B. when the quantity demanded for the product exceeds the quantity supplied. C. when there is a decrease in demand and a decrease in the number of firms producing the product. D. when there is a decrease in supply and a decrease in demand for the product.

A decrease in the price of GPS systems will result in A. a smaller quantity of GPS systems supplied. B. an increase in the supply of GPS systems. C. a decrease in the demand for GPS systems. D. a larger quantity of GPS systems supplied.

After 2009, the price of tablets fell each year and manufacturers of tablets produced and sold more tablets each year. This result is because the A. supply curve of tablets shifted rightward. B. "law of supply" does not apply to companies in the "high-tech" sector of the economy. C. demand curve for tablets shifted leftward. D. "law of demand" does not apply to customers in the "high-tech" sector of the economy.

An increase in input costs in the production of electric automobiles caused the price of electric automobiles to rise. Holding everything else constant, how would this affect the market for gasolineminus−powered automobiles (a substitute for electric automobiles)? A. The demand for gasolineminus−powered automobiles would increase and the equilibrium price of gasolineminus−powered automobiles would increase. B. The supply of gasolineminus−powered automobiles would increase and the equilibrium price of gasolineminus−powered automobiles would decrease. C. The demand for gasolineminus−powered automobiles would decrease because consumers could afford to buy fewer gasolineminus−powered automobiles. D. The demand for gasolineminus−powered automobiles would increase and the equilibrium price of gasolineminus−powered automobiles would decrease.

An increase in the price of off-road vehicles will result in A. a larger quantity of off-road vehicles supplied. B. an increase in the demand for off-road vehicles. C. a decrease in the supply of off-road vehicles. D. a smaller quantity of off-road vehicles supplied.

An increase in the quantity of a product supplied is caused by an increase in the price of the product. A. True B. False

An omitted variable is a variable that: A. has been left out, and if included, would explain why the variables considered in a study are correlated B. does not cause other variables in a study to change when it changes. C. is removed from a study as it can lead to the problem of reverse causality. D. is purposely left out as it does not aid an economic analysis.

Assume that the supply curve for a commodity shifts to the right and the demand curve shifts to the left, both by the same degree. Then, in comparison to the initial equilibrium, the new equilibrium will be characterized by: A. a lower price and the same quantity. B. a higher price and quantity. C. a lower price and quantity. D. a higher price and the same quantity.

Because the demand for illegal drugs is inelastic and the supply is elastic, policies that reduce supply in the illegal drug market do not reduce equilibrium quantity very much. A. True B. False

Causation occurs when: A. a change in one variable is the reason for the change in another variable. B. two variables tend to move in opposite directions. C. two variables tend to move in the same direction. D. a change in one variable does not cause any change in another variable.

Comparative advantage means the ability to produce a good or service A. at a lower opportunity cost than any other producer. B. at a lower selling price than any other producer. C. of a higher quality than any other producer. D. at a higher profit level than any other producer.

Complete the following statement: "When there is a shortage LOADING... of a good A. consumers compete against one another by bidding the price upward. B. as prices increase, consumer demand more of a particular good. C. producers react to shortages by lowering prices. D. as prices increase, producers are driven to produce less. E. decreasing prices lead to a change in demand. The process continues until the market is finally in equilibrium."

Consider an organization that exists to help the poor. The members of the organization are discussing alternative methods of aiding the poor, when a proponent of one particular method asserts that: "If only one poor person is helped with this method, then all our time and money would have been worth it." If you were a member of the organization, what reply best represents clear economic thinking? This attitude A. ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people. B. acknowledges the importance of considering all the alternatives. C. is the most logical because it is focussed on helping even one person. D. recognizes the fact that since the organization is a charity, there is an opportunity cost based on the square root of other peoples' needs.

Consider the demand for cigarettes. Suppose the government decreasesdecreases the price of cigarettes by loweringlowering cigarette taxes. How will this affect the demand for cigarettes over time? If the price of cigarettes decreasesdecreases, then the quantity of cigarettes demanded will A. increase, and this effect will likely become larger (in absolute value) over time. Your answer is correct.B. increase, but this effect will likely become smaller (in absolute value) over time. C. decrease, and this effect will likely become larger (in absolute value) over time. D. increase, and this effect will likely remain constant over time. E.likely never change either initially or over time.

Consider the following statement: "The problem with economics is that it assumes that consumers and firms always make the correct decisions. But we know that everyone makes mistakes." What is the most correct response to this statement? A.Economics assumes that consumers and firms are rational, not that they always make the right decisions. B.Economics has a lot of problems such as those that caused the Great Recession. C.Economics is a proven field of study, and it has already solved this problem. D.Economics does assume that consumers and firms always make the correct decisions.

Consider the markets for BP supreme-grade gasoline, all BP grades of gasoline, and all gasoline. For which of these three markets will demand be most elastic? Demand will be most elastic for A. BP supreme-grade gasoline, then for all BP grades of gasoline, and then for all gasoline. B. all gasoline, then for BP supreme-grade gasoline, and then for all BP grades of gasoline. C. all BP grades of gasoline, then for BP supreme-grade gasoline, and then for all gasoline. D. all gasoline, then for all BP grades of gasoline, and then for BP supreme-grade gasoline. E. BP supreme-grade gasoline, then for all gasoline, and then for all BP grades of gasoline.

Higher price elasticity of demand means that a consumer's demand is: A. more responsive to price changes. B. more responsive to income changes. C. less responsive to income changes. D. less responsive to price changes.

If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is A. elastic. B. inelastic. C. perfectly elastic. D. unit elastic.

If the demand for a product is perfectly inelastic, a decrease in the price of the product A. will decrease total revenue. B. will increase total revenue. C. will not change total revenue. D. any of the above are possible.

If the demand for cell phone service is inelastic, then A. the percentage change in quantity demanded is less than the percentage change in price (in absolute value). B. the percentage change in quantity demanded is equal to the percentage change in price. C. the quantity demanded does not change in response to changes in price. D. the percentage change in quantity demanded is greater than the percentage change in price (in absolute value).

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because A. buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. B. buyers of steel are less sensitive to a price change if they have more time to adjust to the price change. C. profits will fall by a greater amount in the long run than in the short run. D. sales revenue in the building industry will fall sharply.

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, demand for using the toll road must be A. inelastic. B. perfectly elastic. C. elastic. D. unit elastic.

If, in the market for oranges, the supply has increased then A. the supply curve for oranges has shifted to the right. B. there has been a movement upwards along the supply curve for oranges. C. the supply curve for oranges has shifted to the left. D. there has been a movement downwards along the supply curve for oranges.

In February, market analysts predict that the price of titanium will rise in March. What happens in the titanium market in February, holding everything else constant? A. The supply curve shifts to the left. B. The quantity of titanium demanded and the quantity of titanium supplied both increase. C. The supply curve shifts to the right. D. The demand curve shifts to the left.

In June, buyers of titanium expect that the price of titanium will fall in July. What happens in the titanium market in June, holding everything else constant? A. The demand curve shifts to the left. B. The quantity demanded decreases. C. The demand curve shifts to the right. D. The quantity demanded increases.

In a market system, how does society decide what goods and services will be produced? A. Consumers, firms, and the government determine what goods and services will be produced by the choices they make. B. What goods and services will be produced is determined by a vote of consumers. C. The government decides what goods and services will be produced. D. Firms alone determine what goods and services will be produced.

Let D= demand, S = supply, P = equilibrium price, Q= equilibrium quantity. What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be logged? A. S decreases, D no change, P increases, Q decreases B. D decreases, S no change, P and Q decrease C. D and S decrease, P and Q increase D. D no change, S decreases, P increases, Q increases

Let D= demand, S = supply, P = equilibrium price, Q= equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower bad levels of cholesterol? A. D increases, S no change, P and Q increase B. D and S increase, P and Q decrease C. S increases, D no change, P decreases, Q increases D. D no change, S increases, P decreases, Q decreases

Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational? A.When we assume the managers at Microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationality. B.We cannot assume that this pricing decision was rational because we do not have enough information to make an assumption. C.Microsoft's choice was rational: the price will maximize profit. D.Microsoft's choice cannot be rational: the price is clearly more than most people are willing and able to pay.

Of the following, which is the best example of good with a perfectly inelastic demand? A. a diabetic's demand for insulin B. the demand for gasoline C. the demand for a college education by a student who has a full scholarship to an Ivy League school D. the demand for tickets in New York City when the Mets or Yankees are in the World Series

Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. Maria should choose to: A. drive, as it will save her $120. B. drive, as it will give her a real savings of $150. C. travel by train, as it will save her $30 in travel time. D. travel by train, because it is quicker.

Suppose a decrease in the supply of wheat results in an increase in revenue. This indicates that A. the resulting increase in price is proportionately greater than decrease in quantity sold. B. the supply curve for wheat must be vertical. C. the decrease in quantity sold is proportionately larger than the resulting change in price. D. the demand curve for wheat must be vertical.

The cost of producing cigarettes in the U.S. has increased and at the same time, more and more Americans are choosing to not smoke cigarettes. Which of the following best explains the effect of these events in the cigarette market? A. Both the supply and demand curves have shifted to the left. As a result, there has been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price. B. The supply curve has shifted to the right and the demand curve has shifted to the left. As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price. C. Both the supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price. D. The supply curve has shifted to the right and the demand curve has shifted to the left. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

The demand curve for corn is downward sloping. If the price of corn, an inferior good, falls, A. the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded. B. the income and substitution effects offset each other but the price effect of an inferior good leads you to buy less corn. C. both the income and substitution effects reinforce each other to increase the quantity demanded. D. the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases, resulting in a net increase in quantity demanded.

The income effect causes quantity demanded to ________ when the price of a normal good decreases, and causes quantity demanded to ________ when the price of an inferior good decreases. A. increase; decrease B. decrease; decrease C. increase; increase D. decrease; increase

The market for smartwatches has begun to grow, due in part to the success of the Apple Watch. Following the successful launch of the Apple Watch in 2015, companies such as Samsung, Sony, and LG have all developed products to compete with the Apple Watch. The smartwatches introduced to compete with the Apple Watch would be considered A. substitutes for the Apple Watch. B. normal goods compared to the Apple Watch. C. inferior goods compared to the Apple Watch. D. complements to the Apple Watch.

The production possibilities frontier shows the ________ combinations of two products that can be produced in a particular time period with available resources. A. maximum attainable B. minimum attainable C. equitable D. only

The slope of a demand curve is not used to measure the price elasticity of demand because A. the measurement of slope is sensitive to the units chosen for price and quantity. B. the slope of a linear demand curve is not constant. C. the slope of a line cannot have a negative value. D. the slope of the demand curve does not tell us how much quantity changes as price changes.

The substitution effect is the change in the quantity demanded of a good that results from ______________, holding constant the effect of the price change on consumer purchasing power. A. a change in price making the good more or less expensive relative to other goods B. the tendency of people to be unwilling to sell something they own C.a change in the price of a substitute for the good D.an increase in the usefulness of a product as the number of consumers who use it increases

The supply curve for watches A. shows the relationship between the price of watches and the quantity of watches supplied. B. shows the relationship between the quantity of watches firms are willing and able to supply and the quantity of watches consumers are willing and able to purchase. C. shows the supply of watches consumers are willing and able to buy at any given price. D. is downward sloping.

We can show economic efficiency: A. with points on the production possibilities frontier. B. with points inside and on the production possibilities frontier. C. with points outside the production possibilities frontier. D. with points inside the production possibilities frontier. E. with points on and outside the production possibilities frontier.

What are the implications of this idea for the shape of the production possibilities frontier? A. The production possibilities frontier will be bowed outward. B. The production possibilities frontier will have a positive slope. C. The production possibilities frontier will have a negative slope. D. The production possibilities frontier will be bowed inward. E. The production possibilities frontier will be a straight line.

Which of the following describes the substitution effect of a price change? A. The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. B. The change in quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant. C. The change in quantity demanded of a good that results from the change in the price of a substitute for the good. D. The change in demand that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.

Which of the following goods is likely to have the highest price elasticity of demand? A. Pizza B. Gasoline C. Salt D. Life-saving drugs

Which of the following illustrates the law of supply? A. An increase in price causes an increase in the quantity supplied, and a decrease in price causes a decrease in the quantity supplied. B. A change in price causes a shift of the supply curve. C. An increase in the number of firms in an industry causes a shift of the supply curve. D. All of the above illustrate the law of supply.

Which of the following is a normative economic statement? A. The price of gasoline is too high. B. When the price of gasoline rises, the quantity of gasoline purchased falls. C. When the price of gasoline rises, transportation costs rise. D. The current high price of gasoline is the result of strong worldwide demand.

Which of the following is a positive economic statement? A. Scarcity necessitates that people make trade-offs. B. Foreign workers should not be allowed to work for lower wages than the citizens of a country. C. The government should mandate electric automobiles. D. People should not buy SUVs.

Which of the following is the formula to calculate arc elasticity of demand? A. Arc elasticity of demand = [(Q2 - Q1) / (Q2+ Q1)/2] / [(P2 - P1) / (P2 + P1)/2] B. Arc elasticity of demand = [(Q2 - Q1) / (Q2/2)] / [(P2 - P1) / (P2/2)] C. Arc elasticity of demand = [(Q2 + Q1) / (Q2/2)] / [(P2 + P1) / (P2/2)] D. Arc elasticity of demand =[(Q1 - Q2) / (Q2 + Q1)] / [(P1 - P2) / (P2 + P1)]

Which of the following statements is true about data? A. Consistency of models can be checked using data. B. Convincing data analysis in economics relies on using a small sample. C. Facts that describe the world are not considered data. D. Empiricism does not necessarily involve data.

Which of the following statements is true? A. Testing with data enables economists to distinguish between good models and bad models. B. The scientific method used by economists is based on idealism and not empiricism. C. Models that economists use are perfect replicas of reality. D. Models help economists to explain the past, but do not help in predicting the future.

Which of the following was not mentioned in the video as a driver of economic growth? A. Increased demand B. Product innovation C. Process innovation D. Capital investment

Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil? A. A twofold increase in the price of pens and B.threefold increase in the price of pencils C. An increase in the consumer's income D. A decrease in the consumer's income E. A twofold increase in the prices of both pens and pencils

Why has the number of people living on farms gone down so drastically from 1900? A. All of these B. Process innovations such as mechanized planting and harvesting C. Investment in capital such as tractors D. Process innovations such as herd immunization

A decrease in the demand for soft drinks due to changes in consumer tastes, accompanied by an increase in the supply of soft drinks as a result of reductions in input prices, will result in A. a decrease in the equilibrium quantity of soft drinks and no change in the equilibrium price. B. a decrease in the equilibrium price of soft drinks; the equilibrium quantity may increase or decrease. C. a decrease in the equilibrium price of soft drinks and no change in the equilibrium quantity. D. an increase in the equilibrium quantity of soft drinks; the equilibrium price may increase or decrease.

A good is said to have a relatively elastic demand if the value of price elasticity is: A. between 0 and 0.5. B. greater than 1. C. between 0.5 and 1. D. equal to 0.

A production possibilities frontier (PPF) is A. a curve that illustrates the demand of two goods for the average consumer. B. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology. C. a curve that shows the potential productive capabilities of the frontier (defined as the area outside of cities) of a developing economy. D. a curve showing the generally attainable combinations of two products that may be produced with all planned or potential, yet undeveloped technology.

A production possibilities frontier: A. shows how participants in the market are linked. B. shows the maximum attainable combinations of two goods that may be produced with available resources. C. shows the market for a good or service. D. shows the act of buying and selling. E. shows how unlimited wants exceed the limited resources available to fulfill those wants.

A shortage is defined as the situation that exists when the quantity of a good supplied is greater than the quantity demanded. A. True B. False

A supply schedule A. is a table that shows the relationship between the price of a product and the quantity of the product that producers and consumers are willing to exchange. B. is a table that shows the relationship between the price of a product and the quantity of the product supplied. C. is the relationship between the supply of a product and the cost of producing the product. D. is a curve that shows the relationship between the price of a product and the quantity of the product supplied.

All else equal, as the price of a product falls, the quantity supplied increases. A. True B. False

An article in the Wall Street Journal notes that although U.S. oil production has increased rapidly in recent years, the increase has still amounted to only 5 percent of world production. Still, that increase has been "enough to help trigger a price collapse." Source: Georgi Kantchev and Bill Spindle, "Shale-Oil Producers Ready to Raise Output," Wall Street Journal, May 13, 2015. A small increase in supply can lead to a large decline in equilibrium price when A. demand is perfectly elastic. B. demand is relatively inelastic. C. demand is relatively elastic D. supply is perfectly elastic.

An increase in the price of pineapples will result in A. an increase in the supply of pineapples. B. a larger quantity of pineapples supplied. C. a decrease in the demand for pineapples. D. a smaller quantity of pineapples supplied.

Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen. One can conclude that A. the number of tarot card readers has increased. B. the demand for tarot card readers has increased. C. the law of demand has been violated. D. tarot card readers are deliberately charging high prices because they provide services for superstitious clients.

Assume that the price for swimming pool maintenance services has risen and sales of these services have fallen. One can conclude that A. the demand for swimming pool maintenance services has increased. B. the supply of swimming pool maintenance services has decreased. swimming pool maintenance services are becoming C. more technologically advanced. D. the law of supply has been violated.

Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes Booth than those written by Abraham Lincoln. What is a reason for this difference in price? A. Many people are more fascinated by villains and anti-heroes than by heroic figures. B. There are more letters available for collectors to buy that were written by Lincoln than there are letters that were written by Booth. C. Booth was a well-known actor; the demand for his letters rose as wealthy actors attempted to buy them. D. There is a surplus of letters written by Booth and a shortage of letters written by Lincoln.

Because the demand for illegal drugs is inelastic and the supply is elastic, policies that reduce supply in the illegal drug market reduce revenue for drug dealers. A. True B. False

Because the supply of low-quality guns is very elastic, gun buy-back programs in a single city will reduce the number of guns by a large amount. A. True B. False

Danielle Ocean pays for monthly pool maintenance for her home swimming pool. Last week the owner of the pool service informed Danielle that he will have to raise his monthly service fee because of increases in the price of pool chemicals. How is the market for pool maintenance services affected by this? A. There is a decrease in the demand for pool maintenance services. B. There is a decrease in the supply of pool maintenance services. C. There is an increase in the supply of pool maintenance services. D. There is a decrease in the quantity of pool maintenance services supplied.

Economists assume that people are rational in the sense that A. they generally make the correct choices. B. they use all available information as they take actions intended to achieve their goals. C. they make decisions based on total, rather than marginal, variables. D. they do not respond to economic incentives.

From the list below, select the variable that will cause the supply curve to shift: A. Consumer income B. The cost of raw materials C. Population and demographics D. Prices of related goods

Government policies will have their intended effect irrespective of the laws of supply and demand. A. True B. False

If demand is inelastic, the absolute value of the price elasticity of demand is A. one. B. less than one. C. greater than the absolute value of the slope of the demand curve. D. greater than one.

If demand is perfectly elastic, then what is the effect of an increase in price? A. a very small change in quantity demanded B. a decrease in quantity demanded to zero C. a change in quantity demanded exactly equal to the change in price D. no change in quantity demanded

If in the market for peaches the supply curve has shifted to the left, A. the quantity of peaches supplied has decreased. B. the supply of peaches has decreased. C. the quantity of peaches supplied has increased. D. the supply of peaches has increased.

If the demand and supply curves for a commodity both shift to the left by the same amount, then in comparison to the initial equilibrium, the new equilibrium will be characterized by: A. a lower price and a higher quantity. B. the same price and a lower quantity. C. a higher price quantity. D. the same price and a higher quantity.

If the demand for a steak is unit elastic, then A. the percentage change in quantity demanded is 100 percent greater than the percentage change in price (in absolute value). B. the percentage change in quantity demanded is equal to the percentage change in price. C.the percentage change in quantity demanded is 1 percent greater than the percentage change in price. D. quantity demanded does not respond to changes in price.

If the demand for cell phone service is inelastic, then A. the quantity demanded does not change in response to changes in price. B. the percentage change in quantity demanded is less than the percentage change in price (in absolute value). C. the percentage change in quantity demanded is equal to the percentage change in price. D. the percentage change in quantity demanded is greater than the percentage change in price (in absolute value).

If the cross-price elasticity of demand is negative, then the products are: A. unrelated, but if it is positive, then the products are relatedrelated. B. complements, but if it is positive, then the products are substitutes. C. inferior goods, but if it is positive, then the products are normalnormal goods. D. substitutes, but if it is positive, then the products are complements. E. necessities, but if it is positive, then the products are luxuriesluxuries.

In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the United States? A. The supply curve shifted to the right. B. The supply curve shifted to the left. C. The demand curve shifted to the left. D. The demand curve shifted to the right.

In many cities, firms that own office buildings can renovate them for use as residential apartments. According to a news story, in many cities "residential rents are surpassing office rents." The response to an increase in residential rents would be A. an increase in the supply of office space, shifting it to the left. B. a decrease in the supply of office space, shifting it to the left. C. a decrease in the supply of office space, shifting it to the right. D. an increase in the supply of office space, shifting it to the right.

In order to prove that Motrin and Ibuprofen are substitutes, one should measure the ________ and get a ________. A. cross-price elasticity; negative number B. cross-price elasticity; positive number C. price elasticity of demand; number less than 1 (in absolute value) D. price elasticity of demand; number greater than 1 (in absolute value)

Like many other cities, Denver experienced a sharp decline in construction of new houses in the years following 2006. Many carpenters, roofers, and other skilled workers left the area or found jobs in other industries. In addition, builders stopped buying and preparing home lots for construction. According to an article in the Wall Street Journal, by 2014, as consumers increased their demand for new homes in Denver, "New-home prices have surged over the past two years ... amid a shortage of home lots and skilled construction workers." In the future, the price increases of new houses in Denver can be expected to be A. larger because supply is more elastic over time. B. smaller because supply is more elastic over time. C. larger because supply is less elastic over time. D. smaller because supply is less elastic over time.

Manager 1: "The only way we can increase the revenue LOADING... we receive from selling our mobile phonesmobile phones is by cutting the price." Manager 2: "Cutting the price of a product never increases the amount of revenue you receive. If we want to increase revenue, we have to increase price." Do you agree with the reasoning of Manager 2? A. I agree. Cutting the price will not increase the amount of revenue, you have to increase price. B. I disagree. Cutting the price will increase the revenue if the demand is price elastic. C. I agree. Cutting the price will never increase the amount of revenue you receive. D. I disagree. Cutting the price will increase the revenue only if the demand is inelastic.

One would speak of a change in the quantity of a good supplied, rather than a change in supply, if A. prices of substitutes in production change. B. the price of the good changes. C. the cost of producing the good changes. D. supplier expectations about future prices change.

Over the past 30 years, the price of oil has been relatively unstable, fluctuating between $11.00 and well over $100 per barrel. Which of the following potentially contributes to oil-price instability? Oil prices are relatively unstable because A. the market for oil is relatively competitive. B. the supply of oil is inelastic. C. the income elasticity of demand for oil is negative. D. OPEC has been successful in controlling the quantity of oil its members supply. E. the demand for oil is elastic.

Suppose a medical study reveals new benefits to consuming beef and at the same time a bumper corn crop reduces the cost of feeding steers. The equilibrium price of beef will A. fall. B. perhaps rise, fall, or stay the same, but more information is needed to determine which it does. C. rise. D. stay the same.

Suppose gasoline hasgasoline has fewfew close substitutes available. If so, then an increase in the price of gasolinegasoline will likely A. decrease the quantity of gasolinegasoline demanded by a relatively largelarge amount. B. decrease the quantity of gasolinegasolinedemanded by a relatively smallsmall amount. C. increase the quantity of gasolinegasoline demanded by a relatively small amount. D. not change the quantity of gasolinegasoline demanded. E. increase the quantity of gasolinegasoline demanded by a relatively large amount.

Suppose that when the price of strawberries decreases, Simone increases her purchase of whipped cream. To Simone A. strawberries and whipped cream and substitutes. B. strawberries and whipped cream are complements. C. strawberries and whipped cream are normal goods. D. strawberries are a normal good and whipped cream is an inferior good.

Suppose the value of the price elasticity of demand is -3. What does this mean? A. A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. B. A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. C. A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. D. A $1 increase in price causes quantity demanded to fall by 3 units.

Suppose when Nablom's Bakery raised the price of its breads by 10 percent, the quantity demanded fell by 15 percent. What was the effect on sales revenue? A. Sales revenue increased. B. Sales revenue decreased. C. Sales revenue remained unchanged. D. It cannot be determined without information on prices.

The attainable production points on a production possibilities curve are A. the points along the production possibilities frontier. B. the points along and inside the production possibility frontier. C. the horizontal and vertical intercepts. D. the points outside the area enclosed by the production possibilities frontier.

The demand for plums is highest during summer and lowest during winter. Yet plum prices are normally lower in summer than in winter. What must be happening to the supply of plums, from winter to summer, for the equilibrium price to fall? A. The supply does not change. B. The supply increases more than the demand increases. C. The supply increases, but less than the demand increases. D. The supply for plums decreases.

The equilibrium price will rise and the equilibrium quantity might increase, decrease, or stay the same when the A. demand and the supply of a good both decrease. B. demand for a good increases and the supply of it decreases. C. demand and the supply of a good both increase. D. demand for a good decreases and the supply of it increases.

The three economic questions that every society must answer are A. What are the prices of goods, how are they determined, and who will pay for them? B. What goods will be produced, how will they be produced, and who will receive the goods? C. What economic system will be used, how will it be implemented, and who will make market decisions? D. What kind of government will the society have, how will it be run, and who will run it?

When Audrina raised the price of her homemade cookies, her total revenue increased. This suggests that the demand for Audrina's cookies is elastic. A. True B. False

When demand is elastic, a fall in price causes total revenue to rise because A. the percentage increase in quantity demanded is less than the percentage fall in price. B. the increase in quantity sold is large enough to offset the lower price. C. the demand curve shifts. D. when price falls, quantity sold increases so total revenue automatically rises.

When quantity demanded is completely unresponsive to price, what is the value of price elasticity of demand? A. 1 B. 0 C. A negative number D.A number between 0 and 1

When the price of a product changes, A. it only causes a substitution effect by changing the relative price of the product. B. it changes the relative price of the product causing a substitution effect and at the same time it changes the purchasing power of the buyer causing an income effect as well. C. it only causes an income effect by changing the purchasing power of the consumer. D. it changes the relative price of the product causing a network effect and at the same time it changes the purchasing power of the buyer causing an income effect as well.

Which of the following always raises the equilibrium price? A. a decrease in both demand and supply B. an increase in demand combined with a decrease in supply C. an increase in both demand and supply D. a decrease in demand combined with an increase in supply

Which of the following best describes scarcity? A. Wants cannot be fulfilled and thus all goods must be rationed. B. Unlimited wants exceed the limited resources available. C. Markets cannot properly allocate resources. D. Prices of goods are very high.

Which of the following could explain why the demand for table salt is inelastic? A. Salt is a luxury for high-income consumers but a necessity for low-income consumers. B. Households devote a very small portion of their income to salt purchases. C. Salt is a luxury good. D. Salt is a rare commodity.

Which of the following goods is likely to have an income elasticity of demand greater than one? A. Salt B. Diamond jewelry C. Bread D. Gasoline

Which of the following statements about the price elasticity of demand is correct? A. Demand is more elastic the smaller the percentage of the consumer's budget the item takes up. B. Demand is more elastic in the long run than it is in the short run. C. The absolute value of the elasticity of demand ranges from zero to one. D. The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good.

Which of the following statements correctly differentiates between the slope of the demand curve and price elasticity of demand along a linear demand curve? A. The price elasticity of demand for a good is the same at different points on the demand curve, whereas the slope of the demand curve varies depending on the point where it is measured. B. The price elasticity of demand for a good varies along the demand curve, whereas the slope of the demand curve remains the same at different points on the curve. C. The price elasticity of demand is a ratio, whereas the slope of a demand curve is a product. D. The price elasticity of demand is a product, whereas the slope of a demand curve is a ratio.

Which of the following statements is true? A. It is not necessary to consider the risks of a particular alternative while making an optimal decision. B. Rational economic agents maximize more than just monetary income. C. The principle of optimization is only accurate when it comes to making monetary decisions. D. An individual does not require information to make optimal decisions.

Which of the following statements is true? A. Positive economics deals with issues that are subjective. B. Normative statements depend on personal preferences. C. Positive economics recommends what people ought to do. D. Normative economic statements can be confirmed or disproven.

You have an absolute advantage whenever you A. prefer to do one particular activity. B. can produce more of something than others with the same resources. C. can produce something at a lower opportunity cost than others. D. are better educated than someone else.

________ occurs when the direction of cause and effect is mixed up in a study. A. Limited information bias B. Reverse causality C. Omitted variable bias D. Adverse causality

"We find evidence that Economics LOADING... is a good choice of major for those aspiring to become a CEO [chief executive officer]. When adjusting for size of the pool of graduates, those with undergraduate degrees in Economics are shown to have had a greater likelihood of becoming an S&P 500 CEO than any other major." A list of famous economics majors published by Marietta College includes business leaders Warren Buffet, Donald Trump, Ted Turner, and Sam Walton, as well as former presidents George H.W. Bush, Gerald Ford, and Ronald Reagan. Why might studying economics be particularly good preparation for being the top manager of a corporation or a leader in government? A. Economics is less of an issue as you climb the corporate ladder because you usually hire accountants to handle your money. B. Economics teaches us how to look at the tradeoffs involved in every decision. C. Economics is just as valuable to a cashier as it is for a CEO. D. Management and politics have more to do with public relations than economics.

An article in the Wall Street Journal in early 2001 noted two developments in the market for laser eye surgery. The first development concerned side effects from the surgery, including blurred vision. The second development was that the companies renting eyeminus−surgery machinery to doctors had reduced their charges. In the market for laser eye surgeries, these two developments A. decreased demand and increased supply, resulting in a decrease in both the equilibrium price and the equilibrium quantity of laser eye surgeries. B. decreased demand and increased supply resulting in an increase in both the equilibrium quantity and the equilibrium price of laser eye surgeries. C. decreased demand and increased supply, resulting in a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of laser eye surgeries. D. decreased demand and decreased supply, resulting in a decrease in the equilibrium quantity and an increase in the equilibrium price

Assume that a consumer can spend $20 on two goods: pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumer's budget constraint? A. 2 pens and 3 pencils B. 1 pen and 10 pencils C. 2 pens and 5 pencils D. 3 pens and 2 pencils

Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes Booth than those written by Abraham Lincoln. Which of the following events would cause the price differences in these letters to get smaller? A. The demand for Lincoln letters decreases and the demand for Booth letters increases. B. The demand for Booth letters increases. C. The demand for Lincoln letters increases and the supply of Booth letters increases. D. The supply of Lincoln letters increases.

Consider firms selling three goodslong dash—one firm sells a good with an income elasticity of demand less than zero, one firm sells a good with an income elasticity of demand greater than zero but less than one, and one firm sells a good with an income elasticity of demand greater than one. In a recession, sales of a good with A. an income elasticity of demand less than zero will decline along with the sales of a good with an income elasticity of demand greater than zero but less than one. B. an income elasticity of demand less than zero will increase along with the sales of a good with an income elasticity of demand greater than one. C. an income elasticity of demand greater than one will decline the most and sales of a good with an income elasticity of demand less than zero will increase the most. D. an income elasticity of demand less than zero will decline the most and sales of a good with an income elasticity of demand greater than one will increase the most.

Consider the supply of oil. What would make the supply of oil more elastic? The supply of oil would become more elastic if A. the definition of the market becomes narrower. B. more substitutes were available. C. the time horizon becomes longer. D. it were more of a luxury. E. it becomes a larger portion of a consumer's budget.

Economists use the concept of ________ to measure how one economic variable, such as quantity, responds to a change in another economic variable, such as price. A. relativity B. efficiency C. elasticity D. slope

Higher price elasticity of demand means that a consumer's demand is: A. less responsive to price changes. B. more responsive to income changes. C. more responsive to price changes. D. less responsive to income changes.

Holding everything else constant, a decrease in the price of bicycles will result in A. an increase in the demand for bicycles. B. a decrease in the supply of bicycles. C. an increase in the quantity of bicycles demanded. D. a decrease in the quantity of bicycles demanded.

If demand is perfectly elastic, the absolute value of the price elasticity coefficient is A. one. B. equal to the absolute value of the slope of the demand curve. C. infinity. D. zero.

If opportunity costs are constant, the production possibilities frontier would be graphed as A. a negatively sloped curve bowed in toward the origin. B. a positively sloped straight line. C. a negatively sloped straight line. D. a ray from the origin.

If the United States placed an embargo on Swedish products, what would happen in the U.S. market for Swedish furniture? A. The demand curve would shift to the left. B. The supply curve would shift to the right. C. The supply curve would shift to the left. D. The demand curve would shift to the right.

If the demand and supply curves for a commodity shift to the right by the same amount, then in comparison to the initial equilibrium, the new equilibrium will be characterized by: A. a higher quantity and price. B. the same quantity and a lower price. C. a higher quantity and the same price. D. a lower quantity and a higher price.

In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit A. the demand curve shifted to the left resulting in a decrease in the equilibrium price. B. the supply curve shifted to the right resulting in an increase in the equilibrium price. C. the supply curve shifted to the left resulting in an increase in the equilibrium price. D. the demand curve shifted to the right resulting in an increase in the equilibrium price.

In late 2014, oil prices were falling but some energy traders were convinced that oil prices would begin to rise within a few months. According to a news story, these expectations were causing some "traders to put oil in storage while they wait for prices to rise." Holding some oil in storage rather than selling it would A. increase the supply of oil, shifting it to the left. B. increase the supply of oil, shifting it to the right. C. decrease the supply of oil, shifting it to the left. D. decrease the supply of oil, shifting it to the right.

In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit, A. the demand curve shifted to the right resulting in an increase in the equilibrium price. B. the demand curve shifted to the left resulting in a decrease in the equilibrium price. C. the supply curve shifted to the left resulting in an increase in the equilibrium price. D. the supply curve shifted to the right resulting in an increase in the equilibrium price.

Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced A. an increase in the quantity supplied. B. a decrease in the quantity supplied. C. a decrease in supply. D. an increase in supply.

Let D= demand, S = supply, P = equilibrium price, and Q= equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower bad levels of cholesterol? A. D no change, S increases, P decreases, Q decreases B. D and S increase, P and Q decrease C. D increases, S no change, P and Q increase D. S increases, D no change, P decreases, Q increases

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls A. rationality. B. the market. C. scarcity. D. economics.

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall. Holding everything else constant, how would this affect the market for Bluminus−ray players (a complement to LCD televisions)? A. The demand for Bluminus−ray players would increase and the equilibrium price of Bluminus−ray players would decrease. B. The supply of Bluminus−ray players would increase and the equilibrium price of Bluminus−ray players would decrease. C. The demand for Bluminus−ray players would increase and the equilibrium price of Bluminus−ray players would increase. D. The demand for Bluminus−ray players would decrease because consumers could afford to buy fewer LCD televisions and Bluminus−ray players.

Ranchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to increase? A. an increase in the price of sheep feed B. an increase in the price of sheep C. a decrease in the price of cattle D. an increase in the demand for cattle

Scarcity is central to the study of economics because it implies that A. society must make decisions at the margin. B. economic agents are rational. C. every choice involves an opportunity cost. D. wants are unlimited.

Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. If Maria borrows her parents' car and pays for only the gasoline, what is her total cost of driving to destination A? A. $300 B. $250 C. $340 D. $90

The grading system plays an important role in student learning. In their book Effective Grading: A Tool for Learning and Assessment in College, Barbara Walvoord and Virginia Anderson state that "grading infuses everything that happens in the classroom." They also argue that grading "needs to be acknowledged and managed from the first moment that an instructor begins planning a class." The grading system used by a teacher can affect the incentives of students to learn the course material by A.uniformly weighting all course components. B.doubling the points assigned to each component of the course. C.altering the payoffs to achieving success on the various components of the course. D.none of the above since student performance is based on innate intelligence.

The price elasticity of demand for Stork ice cream is -4. Suppose you're told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded? A. 40 percent B. 25 percent C. 2.5 percent D. 0.4 percent

The price of turkeys goes down at Thanksgiving even though demand increases because: A. Suppliers are generous and want everyone to enjoy turkeys. B. Suppliers time the production of turkeys to match up with Thanksgiving, ensuring that higher demand is met. C. Supply increases by relatively more than demand because frozen turkeys are brought to market. D. Consumers don't actually like turkey and grocery stores know they won't buy it at higher prices.

The production possibilities frontier will shift outward A. if resources are not used to produce capital goodsif resources are not used to produce capital goods. B. if production occurs outside the production possibilities frontier. C. if technological advances occurif technological advances occur. D. if resources are used to produce consumption goods. E. if resources are not used in production.

We can show economic inefficiency: A. with points on and outside the production possibilities frontier. B. with points inside and on the production possibilities frontier. C. with points inside the production possibilities frontier. D. with points outside the production possibilities frontier. E. with points on the production possibilities frontier.

What is the difference between an "increase in supply" and an "increase in quantity supplied"? A. There is no difference between the two terms; they both refer to a movement along a given supply curve. B. There is no difference between the two terms; they both refer to a shift of the supply curve. C. An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price. D. An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" means at any given price supply has increased.

Which of the following goods is likely to have the lowest price elasticity of demand? A. Chocolates B. Decorative flowers C. Life-saving drugs D. Potato chips

Which of the following is a product innovation? A. Kyle Field B. self check-out lines C. antibiotics D. assembly lines

Which of the following is an example of capital? A. self checkout lines B. Washington, D.C. C. Kyle Field D. smartphones

Which of the following is most likely to be an example of causation? A. A student wins money by scratching a ticket with a particular coin. He decides to scratch all tickets with the same coin in the future. B. The crime rate is high in a country. The literacy rate is high as well. C. A firm producing CFLs installs new machinery. The per-day production of CFLs increases. D. A soccer player scores 4 goals when he wears red socks. He concludes that the red socks helped him score the goals.

Which of the following is the textbook's definition of a supply curve? A. the quantity of a good or service that a firm is willing to supply at a particular price B. a table that shows the relationship between the price of a product and the quantity of the product supplied C. a curve that shows the relationship between the price of a product and the quantity of the product supplied D. None of the above.

Which of the following is the textbook's definition of a supply schedule? A. the quantity of a good or service that a firm is willing to supply at a particular price B. a curve that shows the relationship between the price of a product and the quantity of the product demanded C. a table that shows the relationship between the price of a product and the quantity of the product supplied D.None of the above.

Which of the following pairs of goods is most likely to have a positive cross-price elasticity? A. Coffee and sugar B. Printers and ink cartridges C. A privately-owned car and public transportation D. Motorcycles and typewriter

Which of the following statements identifies a difference between correlation and causation? A. Causation cannot arise when correlation is present, and correlation cannot arise when causation is present. B. Correlation occurs when one thing directly affects another, whereas causation implies a mutual relationship between two things. C. Correlation implies a mutual relationship between two things, whereas causation occurs when one thing directly affects another. D. A causal relationship exists between two variables when they are correlated, but correlation does not necessarily exist if there's a causal relationship between two variables.

Which of the following statements is CORRECT? A. When both demand and supply decrease, the quantity increases and the price might rise, fall, or remain the same. B. When both demand and supply increase, the price rises and the quantity might increase, decrease, or remain the same. C. When both demand and supply decrease, the quantity decreases and the price might rise, fall, or remain the same. D. When both demand and supply increase, the quantity decreases and the price might rise, fall, or remain the same.

Which of the following statements is true of the scientific method? A. The larger the size of the data set, the greater the scope of inaccuracy in an analysis. B. Arguments based on a few anecdotes are mostly true. C. Empirical arguments are more credible when they are based on a large data set. D. When a researcher looks at a large data set, she is more likely to jump to the wrong conclusions.

Which of the following statements is true? A. If the price of a good is raised and total revenue does not change, demand is perfectly elastic. B. If the price of a good is lowered and total revenue increases, demand is inelastic. C. If the price of a good is raised and total revenue increases, demand is inelastic. D. If the price of a good is lowered and total revenue decreases, demand is elastic.

Which of the following statements is true? A. In general, if a product has few substitutes it will have an elastic demand. B. The demand curve for a necessity is more elastic than the demand curve for a luxury. C. The more narrowly we define a market, the more elastic the demand for a product will be. D. The more time that passes the more inelastic the demand for a product becomes.

Which of the following would cause a decrease in the supply of milk? A. an increase in the number of firms that produce milk B. an increase in the price of cookies (assuming that milk and cookies are complements) C. an increase the price of a product that producers sell instead of milk D. a decrease in the price of milk

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase? A. a decrease in consumer income B. a drought that sharply reduces cotton output C. an increase in consumer income D. unusually good weather that results in a bumper crop of cotton

Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. If the opportunity cost of time increases to $80 per hour, which of the following statements is true? A. Maria should choose to travel by train as it saves her $150. B. Maria should choose to drive as it saves her $10. C. Maria should choose to travel by train as it saves her $10. D. Maria should choose to drive as it saves her $150.

A sportswriter writing about the Cleveland Indians baseball team made the following observation: "If the Indians suddenly slashed all tickets to $10, would their attendance actually increase? Not all that much and revenue would drop dramatically." Source: David Schoenfiel, "Chat with David Schoenfield," espn.com, November 27, 2012. The sportswriter is assuming that the demand for Indians tickets is A. relatively price elastic. B. perfectly price elastic. C. perfectly price inelastic. D. relatively price inelastic.

According to a news story about the International Energy Agency, the agency forecast that "the current slide in [oil] prices won't [reduce] global supply." Would a decline in oil prices ever cause a reduction in the supply of oil? A. No, the supply of oil is fixed. B. Yes, a decline in oil prices would reduce both the quantity of oil supplied and the supply of oil. C. Yes, a decline in oil prices would reduce the supply of oil, but not the quantity of oil supplied. D. No, a decline in oil prices would reduce the quantity of oil supplied, not the supply of oil.

According to a news story about the bus system in the Lehigh Valley in Pennsylvania, "Ridership fell 14 percent in 2012 after a 33 percent increase" in bus fares. Given this information, the demand for bus trips is inelastic The best explanation for this result is that A. bus trips only appeal to a certain market. B. over time people can find alternate forms of transportation. C. these trips are a small portion of someone's budget. D. bus trips are a necessity for those without cars.

According to a news story, during the summer of 2015, gasoline prices were expected to decline by 32 percent, while "U.S. drivers are expected to consume slightly more gasoline, a 1.6 percent increase, during the summer." Given this information, the price elasticity of demand for gasoline is negative . 05−.05. (Enter your response rounded to two decimal places and include a minus sign.) The demand is A. price inelastic because the value is less than zero. B. price elastic because the absolute value is greater than zero. C. price elastic because the value is less than zero. D. price inelastic because the absolute value is less than one.

An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in A. an increase in the equilibrium price of lobster and no change in the equilibrium quantity. B. a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or decrease. C. a decrease in the equilibrium quantity of lobster and no change in the equilibrium price. D. an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.

Assembly lines are an example of: A. All of these B. Capital investment C. Product innovation D. Process innovation

Assume that a combination of 10 bottles of wine and 2 liters of milk lies on a consumer's budget constraint. If the price of one bottle of wine is $10, and one liter of milk is $1, what is the consumer's income? A. $20 B. $100 C. $120 D. $102

Choco Fantasy is a firm that produces both dark chocolates as well as liquor chocolates. It can produce 10,000 bars of dark chocolate per month if all its resources are used to produce only this variety. Similarly, using all its resources in the production of liquor chocolates, the firm can produce 8,000 bars per month. However, during a given month, the firm produces both varieties. Which of the following, if true, would suggest that the firm is operating on its PPF? A. Most domestic consumers prefer the better quality Swiss chocolates imported by the country. B. Medical reports earlier this year indicated that higher chocolate consumption increases the risk of heart attack. C. In an attempt to cut costs, the company is planning to fire its unproductive resources. D. Even though the demand for both liquor and dark chocolates has increased, the company can increase the production of only one variety. E. The opportunity cost of shifting resources from the production of liquor chocolates to dark chocolates is marginal.

Elasticity is: A. the sum of the percentage change in two variables. B. the product of the percentage change in two variables. C. the difference of the percentage change in two variables. D. the ratio of the percentage change in two variables

Every spring, motorists do more driving than during the winter months. Every spring, the price of gasoline increases and the motorists buy more gasoline. This experience suggests that the A. laws of supply and demand are both contradicted for gasoline, though only during the spring driving season. B. "law of supply" does not always hold for necessities like gasoline. C. "law of demand" does not always hold for necessities like gasoline. D. None of the above answers are correct.

For which of the following products is the price elasticity of demand (in absolute value) the largest? A. cigarettes B. milk C. automobiles D. Tide liquid detergent

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is A. unit elastic. B. perfectly elastic. C. relatively inelastic. D. relatively elastic.

If a firm raised its price and discovered that its total revenue fell, then the demand for its product is A. perfectly elastic. B. perfectly inelastic. C. relatively inelastic. D. relatively elastic.

In October, market analysts predict that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant? A. The quantity of platinum demanded and the quantity of platinum supplied both increase. B. The demand curve shifts to the right. C. The supply curve shifts to the left. D. The supply curve shifts to the right.

Lawrence Summers served as secretary of the treasury in the Clinton administration and as director of National Economic Council in the Obama administration. He has been quoted as giving the following moral defense of the economic approach. "There is nothing morally unattractive about saying: We need to analyze which way of spending money on health care will produce more benefit and which less, and using our money as efficiently as we can. I don't think there is anything immoral about seeking to achieve environmental benefits at the lowest possible costs." It would be more moral to reduce pollution, A. not taking the cost into account because pollution is potentially harmful to our health. B. taking the cost into account because the total cost of reducing pollution is likely enormous. C. not taking the cost into account because pollution reduction is typically associated with large benefits. D. taking the cost into account because money spent on pollution reduction is not available for other worthy activities. E. taking the cost into account because reducing pollution often reduces economic growth.

Soo Jin shares a oneminus−bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics student, you rightly conclude that A. Soo Jin did not have a choice; her roommate was a slob. B. Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $950. C. the cost of having one's own space outweighs the benefits. D. Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250.

Studies have shown links between calcium consumption and a reduction in osteoporosis. How does this affect the market for calcium? A. The calcium supply curve shifts to the left because this new information will increase the price of calcium. B. The calcium supply curve shifts to the right because of a change in tastes in favor of calcium. C. The calcium demand curve shifts to the left because this new information will increase the price of calcium. D. The calcium demand curve shifts to the right because of a change in tastes in favor of calcium.

Suppose a decrease in the supply of bottled water results in a decrease in revenue. This indicates that A. the demand for bottled water is inelastic in the price range considered. B. the supply of bottled water is elastic in the price range considered. C. the supply of bottled water is inelastic in the price range considered. D. the demand for bottled water is elastic in the price range considered.

The demand curve for canned peas is downward sloping. If the price of canned peas, an inferior good, rises, A. both the income and substitution effects reinforce each other to decrease the quantity demanded. B. the income and substitution effects offset each other but the price effect of an inferior good leads you to buy more canned peas. C. the income effect which causes you to reduce your canned peas purchases is smaller than the substitution effect which causes you to increase your purchases, resulting in a net increase in quantity demanded. D. the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in the quantity demanded.

The demand for all carbonated beverages is likely to be ________ the demand for Dr. Pepper. A. perfectly inelastic compared to B. more elastic than C. perfectly elastic compared to D. less elastic than

The elasticity of demand for turkeys at Thanksgiving and roses at Valentine's day: A. Becomes more elastic for turkeys but less elastic for roses. B. Does not change. C. Becomes more elastic. D. Becomes less elastic.

The equilibrium quantity of a good will increase and its equilibrium price might rise, fall, or stay the same when A. its demand decreases and supply increases. B. its demand increases and supply decreases. C. its demand and supply both decrease. D. its demand and supply both increase.

The income effect of a decrease in the price of macaroni and cheese (assume this is an inferior good) results in A. an increase in the demand for macaroni and cheese. B. a decrease in the demand for macaroni and cheese. C. an increase in the quantity of macaroni and cheese demanded. D. a decrease in the quantity of macaroni and cheese demanded.

The price elasticity of demand in the United States for crude oil has been estimated to be minus−0.061 in the short run and minus−0.453 in the long run. Source: John C. B. Cooper, "Price Elasticity of Demand for Crude Oil: Estimate for 23 Countries," OPEC Review, March, 2003, pp. 1-8. The demand for crude oil A. is more price inelastic in the long run than in the short run because in the short run a substitute for crude oil may be found. B. is equally price inelastic in both the short and long run as there are not many substitutes for crude oil. C. is price elastic in both the short and long run as there exists many substitutes for crude oil. D. is more price elastic in the long run than in the short run because in the long run a substitute for crude oil may be found.

Total revenue equals A. price per unit times change in quantity sold. B. price per unit times quantity supplied. C. change in price per unit times quantity sold. D. price per unit times quantity sold.

Trinh quits his $80,000minus−aminus−year job to become a fullminus−time volunteer at a museum. What is the opportunity cost of his decision? A. the value he attributes to the joy of working at a museum B. since he will no longer be earning a salary C. depends on the "going rate" of museum employees D. at least $80,000

What does increasing marginal opportunity costs mean? A. Increasing the production of a good requires smaller and smaller decreases in the production of another good. B. Increasing the production of a good requires decreases in the production of another good. C. The economy is unable to produce increasing quantities of goods and services. D. Increasing the production of a good requires larger and larger decreases in the production of another good. E. Production is not occurring on the production possibilities frontier.

What is the economic definition of utility? Utility is A. the sum of consumer and producer surplus. B. the decrease in additional satisfaction consumers receive as they consume more of a good or service during a given period of time. C. the change in enjoyment or satisfaction a person receives from consuming one additional unit of a good or service. D. the enjoyment or satisfaction people receive from consuming goods and services. E. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.

When economists speak of a shortage, they mean a situation in which A. the quantity demanded exceeds quantity supplied. B. the market price is below the equilibrium price. C. some consumers aresome consumers are unable to make a purchase at the current price.the current price. D. all of the above. E. A and B only.

When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to A. the deadweight loss effect. B. the elasticity effect. C. the substitution effect. D. the income effect.

Which of the following claims is most likely to suffer from reverse causality? A. Higher income increases consumption. B. Crime rate is seen to be lower in countries having a higher level of poverty. C. More hours of study is likely to lead to better results. D. Relatively wealthy people tend to be relatively healthy.

Which of the following factors is expected to cause the demand curve for coffee to shift to the right? A. An increase in the supply of coffee due to better weather B. A higher personal tax on the income of all consumers C. A fall in the manufacturing cost of coffee D. A higher tax on the sale of tea, a substitute for coffee

Which of the following goods is likely to have the highest price elasticity of demand? A. Gasoline B. Salt C. Life-saving drugs D. Pizza

Which of the following is evidence of a shortage of walnuts? A. The price of cashews is lowered in order to make up for the walnut shortage. B. Firms lower the price of walnuts. C. The equilibrium price of walnuts falls due to a decrease in demand. D. The quantity demanded of walnuts is greater than the quantity supplied.

Which of the following pairs of goods are likely to be considered substitutes? A. Printers and printing ink B. A Nokia cell phone and a Nokia cell phone charger C. Coffee and sugar D. A Ford car and public transportation

Which of the following statements is true? A. Individuals who have never been the best at doing anything perform all tasks at a higher opportunity cost than others. B. Individuals who have never been the best at doing anything must have an absolute advantage in at least ones task. C. Individuals who have never been the best at doing anything cannot have a comparative advantage in producing any product. D. Individuals who have never been the best at doing anything can still have a comparative advantage in producing some product.

Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon? A. a decrease in demand and a decrease in supply B. a decrease in demand and an increase in supply C. an increase in supply and an increase in demand greater than the increase in supply D. an increase in supply

Which of the following would cause an increase in the equilibrium price and an increase in the equilibrium quantity of watermelons? A. an increase in demand and an increase in supply B. a decrease in demand and an increase in supply C. an increase in supply D. an increase in supply and an increase in D. demand greater than the increase in supply

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase? A. a decrease in consumer income B. a drought that sharply reduces cotton output C. unusually good weather that results in a bumper crop of cotton D. an increase in consumer income

Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase? A. an increase in the price of butter, a complement for white bread B. an increase in the price of rye bread, a substitute for white bread C. an increase in the price of flour D. a decrease in the price of flour

Why aren't imports of roses from South America and Africa high year-round instead of just around Valentine's Day? A) The spike in demand makes it profitable for producers with higher costs (like transportation) to enter the market. B) Flower production in the US is particularly low in February, so US-based supply is shifted leftward that month because of the climate. C) The government limits imported flowers except around Valentine's and Mothers' Day. D) A&B E)None of these

With the increased usage of cell phone services, what has happened to the price elasticity of demand for land-line telephone services? A. The absolute value of the price elasticity coefficient has probably gone down. B. It has become more price inelastic. C. It has become more income elastic. D. It has become more price elastic.

he wrist watch industry in a country is not very competitive. There are limited brands available and the existing firms use their market power to keep prices high. Envy, one of the leading brands in the market, is planning to increase the price from $1,000 to $1,100 per watch. The firm is expecting the quantity demanded to fall by only 7 percent. However, after the price is increased to $1,100, quantity demanded actually declined by 12 percent. Sonia, a student of economics, knows that the average income level in this country has increased over the last year. When actual sales of Envy watches turn out to be lower than anticipated, she concludes that the income elasticity of demand for Envy watches is negative. Her conclusion is flawed because A. she is assuming that the government of this country does not import watches. B. she is confusing between consumer and producer surplus. C. she is assuming that rival firms have reduced the price of their watches. D. she is confusing between price elasticity of demand E. she is ignoring the fact that the cost of production of Envy watches could be high.

The observation that an increase in ticket prices to the opera "backfired' means that A. total revenue from ticket sales increased following the price increase. B. ticket sales decreased following the price increase. C. ticket sales increased following the price increase. D. total revenue from ticket sales decreased following the price increase. The demand for opera tickets to the Metropolitan Opera is A. inelastic because total revenue from ticket sales increased following the price increase. B. inelastic because total revenue from ticket sales decreased following the price increase. C. elastic because total revenue from ticket sales increased following the price increase. D. elastic because total revenue from ticket sales decreased following the price increase.

The cross-price elasticity of demand is A. the percentage change in quantity demanded divided by the percentage change in price. B. the percentage change in quantity supplied divided by the percentage change in price. C. the percentage change in quantity demanded of one good divided by the percentage change in the quantity of another good. D. the percentage change in quantity demanded divided by the percentage change in income. E. the percentage change in quantity demanded of one good divided by the percentage change in the price of another good.

Indicate which of the following statements represent positive analysis and which represent normative analysis a. A 50-cent-per-pack tax on cigarettes will reduce smoking by teenagers by 12 percent. This represents __________ b. The federal government should spend more on AIDS research. This represents __________ c. Rising paper prices will increase textbook prices. This represents __________ d. The price of coffee at Starbucks is too high. This represents ___________

PNPN

Leonard Fleck, a philosophy professor at Michigan State University, has written, "When it comes to health care in America, we have limited resources for unlimited health care needs. We want everything contemporary medical technology can offer that will improve the length or quality of our lives as we age. But as presently healthy taxpayers, we want costs controlled." Is it necessary for all economic systems to limit services such as health care? A market system prevents people from getting as many goods and services as they want due to which of the following? A. Their income. B. The government because it allocates the goods and services. C. Both A and B. D. Neither A nor B.

Yes A

The demand by all the consumers of a given good or service is the ________ for the good or service. A. law of demand B. scheduled demand C. market demand D. quantity demanded

Causation occurs when: A. change in one variable is the reason for the change in another variable. B. two variables tend to move in opposite directions. C. change in one variable does not cause any change in another variable. D. two variables tend to move in the same direction.

"An increase in the price of gasoline will increase the demand for hybrid vehicles." This statement is an example of a positive economic statement. A. True B. False

A decrease in the price of either one or the other good will cause a consumer's budget constraint to: A. pivot rightward (pivot out). B. shift leftward. C. shift rightward. D. pivot leftward (pivot in).

A decrease in the price of either one or the other good will cause a consumer's budget constraint to: A. pivot rightward (pivot out). B. shift rightward. C. pivot leftward (pivot in). D. shift leftward.

A(n) ________ is represented by a leftward shift of the demand curve while a(n) ________ is represented by a movement along a given demand curve. A. decrease in demand; increase in quantity demanded B. decrease in demand; increase in demand C. decrease in quantity demanded; decrease in demand D. increase in demand; decrease in quantity demanded

By definition, economics is the study of A. the choices people make to attain their goals, given their scarce resources. B. how to make money in a market economy. C. supply and demand. D. how to make money in the stock market.

The extra cost associated with undertaking an activity is called A. net loss. B. foregone cost. C. marginal cost. D. opportunity cost.

Economic models do all of the following except A. portray reality in all its minute details. B. answer economic questions. C. make economic ideas explicit and concrete for use by decision makers. D. simplify some aspect of economic life

Economics is the study of A. Scarcity and how societies deal with it. B. Why people have infinite wants. C. How to make as much money as possible. D. How to generate more resources.

Economists assume that individuals A. are rational and respond to incentives. B. behave in unpredictable ways. C. will never take actions to help others. D. prefer to live in a society that values fairness above all else.

Economists assume that the goal of consumers is to A. make themselves as well off as possible. B. consume as much as possible. C. do as little work as possible to survive. D. spend all their income.

If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint: A. pivots leftward (pivot in) without a change in the intercept on the horizontal axis. B. pivots rightward (pivot out) without a change in the intercept on the horizontal axis. C. shifts to the right. D. shifts to the left.

Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and therefore choose to invest in foreign markets. By using all available information as they act to achieve their goals, these investors are exemplifying the economic idea that A. people are rational. B. people respond to economic incentives. C. optimal decisions are made at the margin. D. equity is more important than efficiency.

When trying to assess your economic well-being you should: A. Compare your situation to that of most of the people alive today. B. Compare yourself to Bill Gates. C. Compare yourself to your neighbors. D. Compare yourself to your parents

The Law of Demand states that: A. the quantity demanded of a commodity varies inversely with the price of the commodity. B. the demand for a commodity is mostly influenced by consumers' income. C. the quantity demanded of a commodity is the same for all consumers in a perfectly competitive market. D. the demand for a commodity always equals the supply of the commodity.

The demand schedule for a commodity illustrates how the consumption of a commodity changes with changes in: A. its price. B. income. C. supply. D. tastes and preferences.

The slope of a budget constraint represents: A. the opportunity cost of one good in terms of another. B. the price of the good measured along the vertical axis. C. the price of the good measured along the horizontal axis. D. the money income of the consumer.

The steps needed to evaluate the best way to organize an economy include: A. Determining what will be produced, how it will be produced, and who gets it, and then evaluating these outcomes. B. Determining whether an economy provides free choice, and an appropriate role for government. C. Determining what will be produced, how it will be produced and who gets it, and then limiting the role of government. D. Limiting central power and making the maximum use of markets. E. C and D above.

We can derive the market demand curve for gold earrings A. by adding horizontally the individual demand curves of each gold earring consumer. B. by adding the prices each gold earring consumer is willing to pay for each quantity. C. by adding vertically the quantity demanded of each gold earring consumed at each price. D. only if the tastes of all gold earring consumers are similar.

When buyers and sellers operate in a competitive market, they are A. Following their own self-interest, doing whatever serves them best. B. Following their own self-interest, but wanting the economy to operate efficiently. C. Trying to ensure that markets work. D. Trying to take advantage of the other person. E. A and C above.

Which of the following describes the substitution effect of a price change? A. The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. B. The change in quantity demanded of a good that results from the change in the price of a substitute for the good. C. The change in quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant. D. None of the above.

Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil? A. A twofold increase in the price of pens and a threefold increase in the price of pencils B. An increase in the consumer's income C. A decrease in the consumer's income D. A twofold increase in the prices of both pens and pencils

The extra cost associated with undertaking an activity is called A. opportunity cost. B. net loss. C. marginal cost. D. foregone cost.

A change in the price of a good has two effects on the quantity consumed. What are these effects? A. the utility effect and the budget effect B. the income effect and the substitution effect C. the consumption effect and expenditure effect D. the total utility effect and marginal utility effect

A correlation between two variables implies that: A. when one variable changes, the other variable always changes by exactly the same amount. B. there is a mutual relationship between both the variables. C. it is impossible to measure one variable without measuring the other. D. there is a cause-effect relationship between the two variables.

A major question that faced societies 250 years ago was A. What would happen if you organized more of the economy with guilds. B. What would happen if you organized more of the economy with markets. C. What would happen if you organized more of the economy with government. D. Was there enough BlueBell? E. All of the above.

Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases: A. the opportunity cost of buying shirts increases. B. the opportunity cost of buying sweaters increases. C. There is no change in the opportunity cost of consuming either good. D. the opportunity cost of buying sweaters decreases.

Central control of economies A. Emerged with governments. B. Regulated resources like land and water. C. Was first proposed by Greek philosopher Leonidas. D. Was absent when society consisted of just prehistoric clans. E. None of the above.

Economists assume that rational behavior is useful in explaining choices people make A. even though people rarely, if ever, behave in a rational manner. B. even though people may not behave rationally all the time. C. because individuals act rationally all the time in all circumstances. D. because irrational people do not make economic choices.

If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely. A. demand function B. budget constraint C. demand schedule D. indifference curve

If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely. A. indifference curve B. budget constraint C. demand function D. demand schedule

Positive analysis is concerned with "what ought to be," while normative analysis is concerned with "what is." A. True B. False

Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles. These consumers who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that A. people are rational. B. people respond to economic incentives. C. optimal decisions are made at the margin. D. equity is more important than efficiency.

The highest valued alternative that must be given up to engage in an activity is the definition of A. marginal benefit B. opportunity cost C. marginal cost D. economic equity

The income effect of an increase in the price of peaches is A. the change in the quantity of other fruit demanded that results from the impact of the price change on purchasing power, holding all other factors constant. B. the change in the quantity of peaches demanded that results from the effect of the change in price on consumer purchasing power, holding all other factors constant. C. the change in the quantity of peaches demanded that results from the price increase, making peaches more expensive than other fruit, holding constant the effect of the price change on consumer purchasing power. D. None of the above.

Which of the following best describes the difference between a demand curve and a demand schedule? A. A demand curve shows different quantities of a good demanded at different prices, whereas a demand schedule shows different quantities of a good demanded at different incomes. B. A demand curve is a graphical representation of the relationship between the quantity of a good and its price, whereas a demand schedule is a tabular representation. C. A demand curve shows different quantities of a good demanded at different incomes, whereas a demand schedule shows different quantities of a good demanded at different prices. D> A demand curve can be derived from a demand schedule, but a demand schedule cannot be derived from a demand curve.

Which of the following is a normative economic statement? A. With rising home prices and falling mortgage interest rates, the amount of home foreclosures has decreased. B. Farmers should not be allowed to grow and sell genetically-modified crops. C. The federal government is considering increasing regulations on the use of fossil fuels to promote the use of wind power. D. Rising corn prices have increased the price of corn-based ethanol.

Which of the following is a positive economic statement? A. The government should revamp its immigration policies. B. Raising the tax on gasoline raises the selling price of gasoline. C. U.S. citizens should only buy products which are produced in the United States. D. The government should ban the production and sale of incandescent light bulbs.

________ is the difference between the willingness to pay and the price paid for a good. A. Seller's profit B. Producer surplus C. Consumer surplus D. Revenue

A budget constraint A. shows the prices that a consumer chooses to pay for products he consumes. B. represents the bundles of consumption that make a consumer equally happy. C. refers to the limited amount of income available to consumers to spend on goods and services. D. reflects the desire by consumers to increase their income.

A model refers to: A. a set of facts established by observation and measurement. B. facts, measurements, or statistics that describe the world. C. a simplified description, or representation, of reality. D. a perfect replica of reality.

Adam Smith's proposition or theorem consists of A. Market outputs are efficient, and rely on prices to get there. B. Market outputs are efficient and those outputs are allocated efficiently C. Market outputs are efficient, those outputs are produced efficiently, and those outputs are allocated among buyers in the most efficient way. D. Market outputs are efficient, those outputs are allocated in the most efficient way, and prices are used to get there.

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that A. people with health insurance are less likely to be overweight than people without health insurance. B. people with health insurance are equally likely to be overweight as people without health insurance. C. people with health insurance are more likely to be overweight than people without health insurance. D. there is no correlation between having health insurance and being overweight.

If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to: A. pivot leftward (pivot in) along the horizontal axis. B. pivot rightward (pivot out) along the horizontal axis C. pivot leftward (pivot in) along the vertical axis. D. pivot rightward (pivot out) along the vertical axis.

Making optimal decisions "at the margin" requires A. making borderline decisions. B. making decisions according to one's whims and fancies. C. weighing the costs and benefits of a decision before deciding if it should be pursued. D. making consistently irrational decisions.

The buyers of a good will want to purchase it as long as their willingness to pay for the good is: A. equal to zero. B. greater than zero. C. greater than or equal to the price. D. less than the price.

The principle of opportunity cost is that A. taking advantage of investment opportunities involves costs. B. in a market economy, taking advantage of profitable opportunities involves some money cost. C. the economic cost of using a factor of production is the alternative use of that factor that is given up. D. the cost of production varies depending on the opportunity for technological application.

The slope of a budget constraint represents: A. the price of the good measured along the vertical axis. B. the price of the good measured along the horizontal axis. C. the opportunity cost of one good in terms of another. D. the money income of the consumer.

The substitution effect of an increase in the price of peaches is A. the change in the supply for peaches that results when the price of peaches increases. B. the change in the quantity of peaches demanded that results from the effect of the change in the price of peaches on the consumer's purchasing power. C. the change in the quantity demanded that results from a change in the price of peaches, making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. D. None of the Above.

The video describes the steps in simple arithmetic as proceeding from A. Numbers to cardinal numbers to addition to subtraction to division to multiplication. B. Numbers to addition to subtraction to division to multiplication. C. Numbers to cardinal numbers to addition to subtraction to multiplication to division. D. Cardinal numbers to numbers to addition to multiplication to subtraction to division. E. None of the above.

When people invest in a business, those investments A. Are efficient if the government backs the investment. B. Are efficient if they prove to be successful. C. Are efficient if they are investing their own money. D. Are often inefficient because they don't work out. E. B and C above.

When sellers sell goods in a market they are doing so because A. They are trying to get to the efficient market solution. B. They want the economy to function well, so they can contribute to social welfare. C. They can make more money selling that good than doing something else. D. A and B above. E. All of the above.

Which of the following is a normative economic statement? A. The current low price of wheat is the result of increased worldwide supply. B. When the price of wheat falls, the cost of wheat-based products falls. C. The price of wheat is too low. D. When the price of wheat falls, the quantity of wheat purchased rises.

Which of the following is a normative economic statement? A. The state of Texas is considering increasing funds for light-rail development to promote the use of public transportation. B. With rising mortgage rates and rising unemployment rates, the number of unsold homes has increased. C. Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable. D. Rising global demand for coal has led to increases in the price of coal.

Which of the following is a positive economic statement? A. The U.S. government should not have bailed out U.S. auto manufacturers. B. The standard of living in the United States should be higher. C. If the price of iPhones falls, a larger quantity of iPhones will be purchased. D. The government should revamp the health care system.

he three fundamental questions that must be answered by any economy include: A. What to produce, why goods are produced, and who gets the goods. B. Why to produce particular goods, how to produce them, and who gets them. C. What to produce, how to produce goods, and who gets the goods. D. How to produce goods, why to produce them, and who gets them. E. Why to produce goods, how to produce them, and who gets them.

A budget constraint A. represents the bundles of consumption that make a consumer equally happy. B. shows the prices that a consumer chooses to pay for products he consumes. C. reflects the desire by consumers to increase their income. D. refers to the limited amount of income available to consumers to spend on goods and services.

A budget constraint is a straight line because: A. the tastes and preferences of the consumer change along the constraint. B. the opportunity cost of buying each of the goods changes along the constraint. C.a consumer has a limited money income. D. a consumer faces a fixed price of both goods that do not change with changes in consumption.

A change in the slope of a budget constraint indicates: A. a change in the price of either good without a change in the opportunity cost. B. a change in the consumer's tastes and preferences. C. a change in the consumer's income. D. a change in the price of either good that causes a change in the opportunity cost.

Adam Smith's book, the Wealth of Nations, investigated A. The factors affecting economic wealth across countries. B. The role of wealth played in social well-being. C. The role of custom in the economy. D. The role of markets in determining economic efficiency. E. All of the above.

An item has utility for a consumer if it A. has a high price. B. is something everyone else wants. C. is scarce. D. generates enjoyment or satisfaction.

As early societies became more complex, economies started to rely A. On custom. B. On centralized control of resources. C. On markets and trade. D. All of the above. E. None of the above.

Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases: A. the opportunity cost of buying sweaters decreases. B. There is no change in the opportunity cost of consuming either good. C. the opportunity cost of buying shirts increases. D. the opportunity cost of buying sweaters increases.

Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits. A. selfishly B. emotionally C. equitably D. rationally

Economics studies A. Scarcity. B. The social institutions used to address scarcity. C. What to produce, how to produce it, and who gets it. D. All of the above

Economists assume that rational people do all of the following except A. respond to economic incentives. B. weigh the benefits and costs of all possible alternative actions. C. use all available information as they act to achieve their goals. D. undertake activities that benefit others and hurt themselves.

Hunter-gatherer societies allocated resources by a combination of A. Individual decisions. B. Sharing customs. C. Organized hunting/gathering activity D. All of the above.

If quantity of milk is measured on the horizontal axis and quantity of juice is measured on the vertical axis, a decrease in the price of milk will cause the budget constraint to: A. pivot rightward (pivot out) along the vertical axis. B. shift to the left. C. shift to the right. D. pivot rightward (pivot out) along the horizontal axis.

If quantity of milk is measured on the horizontal axis and quantity of juice is measured on the vertical axis, a decrease in the price of milk will cause the budget constraint to: A. pivot rightward (pivot out) along the vertical axis. B. shift to the right. C. shift to the left. D. pivot rightward (pivot out) along the horizontal axis.

If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget A. shifts to the left. B. pivots rightward (pivot out) without a change in the intercept on the horizontal axis. C. shifts to the right. D. pivots leftward (pivot in) without a change in the intercept on the horizontal axis.

In which of the following ways did the video not indicate you were rich compared to King George? A. Indoor plumbing B. Travel C. Music D. Power E. Medical treatment

John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is ________. A. $2.50 B. $10 C. $2 D. $3

Marginal utility is the A. total satisfaction received from consuming a given number of units of a product. B. satisfaction achieved when a consumer has had enough of a product. C. average satisfaction received from consuming a product. D. extra satisfaction received from consuming one more unit of a product.

The ________ plots the relationship between prices and the quantity that buyers are willing to purchase. A. market curve B. willingness to accept curve C. supply curve D. demand curve

The key advantage of market exchange compared to one-on-one (barter) trade is that A. Markets allow for greater specialization. B. Markets allow trading to occur to a larger extent. C. Markets are more efficient. D. All of the above.

The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as A. the price constraint. B. economizing behavior. C. maximizing behavior. D. the budget constraint.

The revenue received from the sale of ________ of a product is a marginal benefit to the firm. A. no units B. only profitable units C. the total number of units D. an additional unit

Using basic assumptions you can determine A. Why markets are efficient. B. When markets are efficient. C. When government intervention helps or hurts economic performance. D. All of the above. E. A and B above.

Which of the following can be derived from other assumptions about numbers. A. Subtraction. B. Multiplication. C. Division D. All of the above. E. B and C above.

Which of the following examples best describes the Law of Demand? A. When the price of Nokia phones increased, the demand for Samsung phones increased. B. When the price of gasoline increased, the demand for cars fell. C. When Alex received a pay hike, his consumption of all goods increased. D. When the price of tea increased, the quantity demanded of tea decreased.

Which of the following is NOT an economic question: A. Do we have enough medical care in the economy? B. Which type of music should we produce more of? C. Should we make hybrids or SUVs? D. Why do we need more Blue Bell ice cream? E. None of the above.

Which of the following is NOT an economic question: A. How many iPhones and Droids should we produce? B. Should we urbanize farmland? C. How much BlueBell should be made? D. Would people be better off if they wanted fewer goods? E. Should we teach courses online?

Which of the following is NOT an economic question: A. Should seniors get the first pick of seats in the student section at Kyle? B. Should you study for a test or party? C. Should Texas A&M allocate seats in classes using a first-come, first-served approach? D. Should you eat healthy food? E. None of the above.

Which of the following is a positive economic statement? A. The U.S. government should increase regulations on the banking industry. B. The standard of living in the United States is too low. C. The government should implement a national consumption tax. D. If the price of beef falls, a larger quantity of it will be bought.

Which of the following are assumptions needed for simple arithmetic A. Numbers exist. B. Multiplication. C. Addition. D. All of the above. E. A and C above.

A hunter-gatherer society A. Is a notable exception to the general proposition that all societies must answer the question of what to produce. B. Is a notable exception to the general proposition that all societies must answer the question of how to produce it. C. Is a notable exception to the general proposition that all societies must answer the question of who gets it. D. All of the above. E. None of the above.

Are you richer than Answers: A. King George III of England? B. Queen Elizabeth II of England? C. Most people in the world today? D. All of these E. A and C

Consider the following statements: a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area. b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. c. Firms produce more of a particular DVD when its selling price rises. A. a only B. b only C. c only D. a and b E. a, b, and c

If you have a competitive equilibrium for a two market economy consisting of tacos and enchiladas then A. The market equilibrium quantity of tacos is efficient. B. The market equilibrium quantity of enchiladas is efficient. C. The sellers of tacos have higher costs than other potential sellers. D. All of the above. E. A and B above.

The opportunity cost of going to an outdoor music festival is A. the enjoyment you receive from going to the festival. B. the value of the time spent at the festival. C. the cost of the festival ticket only. D. zero because there are no overhead costs for an outdoor festival. E. equal to the highest value of an alternative use of the time and money spent on the festival.

What does the video say about scarcity? Answers: A. We must find ways to deal with that scarcity. B. People should always want more. C. Figure out the best set of social arrangements to address scarcity. D. All of the above. E. A and C above.

Which of the following can be established using economic analysis: A. People should work on teams to produce things because there is more job satisfaction. B. Products should be made more reliably. C. The government should not be the entity to choose the amounts of all available goods and services in the economy. D. None of the above can be established through economic analysis. E. All of the above can be established through economic analysis.

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