Econ 202 quiz questions

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Arthur buys a new cell phone for $150. He receives consumer surplus of $150 from the purchase. How much does Arthur value his cell phone? $0 $150 $225 $300

$300

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? 40 percent 25 percent 2.5 percent 0.4 percent

2.5 percent

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

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

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

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 focused 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.

Higher price elasticity of demand means that a consumer's demand is: more responsive to price changes. less responsive to price changes. less responsive to income changes. more responsive to income 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 elastic. unit elastic. perfectly elastic. inelastic.

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

Let D= demand, S = supply, P = equilibrium price, and 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 no change, S decreases, P increases, Q increases. D. D and S decrease, P and Q increase.

Soo Jin shares a oneminusbedroom 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 figures that the additional benefit of having her own place (as opposed to sharing) is at least $250. B. the cost of having one's own space outweighs the benefits. C. Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $950. D. Soo Jin did not have a choice; her roommate was a slob.

Suppliers will be willing to supply a product only if A) the price received is at least equal to the additional cost of producing the product. B) the price is higher than the average cost of producing the product. C) the price received is at least double the additional cost of producing the product. D) the price received is less than the additional cost of producing the product.

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

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 increases more than the demand increases. B. The supply does not change. C. The supply increases, but less than the demand increases. D. The supply for plums decreases.

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

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

Which of the following describes the substitution effect of a price change? 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. The change in quantity demanded of a good that results from the change in the price of a substitute for the good. 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. None of the above.

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

Which of the following statements about the price elasticity of demand is correct? Demand is more elastic in the long run than it is in the short run. The absolute value of the elasticity of demand ranges from zero to one. Demand is more elastic the smaller the percentage of the consumer's budget the item takes up. 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 is true of the scientific method? A. Empirical arguments are more credible when they are based on a large data set. B. Arguments based on a few anecdotes are mostly true. C. When a researcher looks at a large data set, she is more likely to jump to the wrong conclusions. D. The larger the size of the data set, the greater the scope of inaccuracy in an analysis.

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

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

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6. What does this mean? If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased. A 6 percent decrease in the price of grapefruit juice leads to a 1 percent increase in orange juice consumption. The demand for orange juice is 6 times greater than the demand for grapefruit juice. A 1 percent increase in the price of grapefruit juice leads to a 6 percent increase in orange juice consumption.

A 1 percent increase in the price of grapefruit juice leads to a 6 percent increase in orange juice consumption.

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

A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.

What is the difference between an "increase in supply" and an "increase in quantity supplied"? There is no difference between the two terms; they both refer to a shift of the supply curve. 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. There is no difference between the two terms; they both refer to a movement along a given supply curve. 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.

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.

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

Are rational and respond to incentives

A market system prevents people from getting as many goods and services as they want due to which of the following? A. The government because it allocates the goods and services. B. Their income. C. Both A and B. D. Neither A nor B.

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

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

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 has a lot of problems such as those that caused the Great Recession. B. Economics assumes that consumers and firms are rational, not that they always make the right decisions. C. Economics does assume that consumers and firms always make the correct decisions. D. Economics is a proven field of study, and it has already solved this problem.

Demand for a luxury item, such as a yacht, is likely to be income elastic and price inelastic. both income inelastic and price inelastic. income inelastic and price elastic. both income elastic and price elastic.

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

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

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: pivot rightward (pivot out) along the horizontal axis. pivot leftward (pivot in) along the vertical axis. pivot leftward (pivot in) along the horizontal axis. pivot rightward (pivot out) along the vertical axis

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

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

Trinh quits his $80,000minusaminusyear job to become a fullminustime volunteer at a museum. What is the opportunity cost of his decision? A. depends on the "going rate" of museum employees B. at least $80,000 C. 0 since he will no longer be earning a salary D. the value he attributes to the joy of working at a museum

Which of the following is likely to shift the market demand curve for school textbooks to the right? An increase in school tuition fees An increase in the enrollment rates in high schools A fall in the total income of all consumers A fall in the price of school textbooks

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

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

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 give her a real savings of $150. B. drive, as it will save her $120. C. travel by train, because it is quicker. D. travel by train, as it will save her $30 in travel time.

The Waco Kid's Cowboy Hats Marginal Cost (dollars) 1st hat $24 2nd hat $30 3rd hat $38 4th hat $46 The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $35, The Waco Kid will produce A) 1 hat. B) 2 hats. C) 3 hats. D) 4 hats.

B) 2 hats.

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

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

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

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

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. tarot card readers are deliberately charging high prices because they provide services for superstitious clients. B. the law of demand has been violated. C. the demand for tarot card readers has increased. D. the number of tarot card readers has increased.

By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good. price; quantity; quantity quantity; price; price price; quantity; price quantity; price; quantity 1

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

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: pivot leftward (pivot in) along the horizontal axis. pivot rightward (pivot out) along the horizontal axis. pivot leftward (pivot in) along the vertical axis. pivot rightward (pivot out) along the vertical axis.

If the price of a good increases, ________. the consumer surplus increases the budget constraint shifts to the right the consumer surplus decreases the budget constraint shifts to the left

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

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. S increases, D no change, P decreases, Q increases B. D no change, S increases, P decreases, Q decreases C. D increases, S no change, P and Q increase D. D and S increase, P and Q decrease

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 Bluminusray players (a complement to LCD televisions)? A. The supply of Bluminusray players would increase and the equilibrium price of Bluminusray players would decrease. B. The demand for Bluminusray players would increase and the equilibrium price of Bluminusray players would decrease. C. The demand for Bluminusray players would increase and the equilibrium price of Bluminusray players would increase. D. The demand for Bluminusray players would decrease because consumers could afford to buy fewer LCD televisions and Bluminusray players.

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 $150. C. Maria should choose to drive as it saves her $10. D. Maria should choose to travel by train as it saves her $10.

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

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00. Although her money income had not changed, Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant. Toni's actions are explained by which of the following? income effect only or substitution effect only but not both effects price effect income and substitution effects consumption effect

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 acknowledge 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. doubling the points assigned to each component of the course. B. uniformly weighting all course components. C. altering the playoffs to achieving success on the various components of the course. D. none of the above since student performance is based on innate intelligence.

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

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 elastic. unit elastic. inelastic. perfectly inelastic.

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

Which of the following is most likely to be an example of causation? A. The crime rate is high in a country. The literacy rate is high as well. B. A soccer player scores 4 goals when he wears red socks. He concludes that the red socks helped him score the goals. C. A firm producing CFLs installs new machinery. The per-day production of CFLs increases. D. 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.

Which of the following pairs of goods are likely to be considered complements? Nokia and Samsung cell phones Motorcycles and typewriters Pens and writing pads Laptops and electric heaters

Which of the following statements identifies a difference between correlation and causation? A. Correlation occurs when one thing directly affects another, whereas causation implies a mutual relationship between two things. B. 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. C. Correlation implies a mutual relationship between two things, whereas causation occurs when one thing directly affects another. D. Causation cannot arise when correlation is present, and correlation cannot arise when causation is present.

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

A demand curve shows the relationship between the price of a product and the demand for the product. the willingness of consumers to substitute one product for another product. the relationship between the price of a product and the total benefit consumers receive from the product. the willingness of consumers to buy a product at different prices.

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 demand curve for tablets shifted leftward. "law of demand" does not apply to customers in the "high-tech" sector of the economy. "law of supply" does not apply to companies in the "high-tech" sector of the economy. supply curve of tablets shifted rightward.

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

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

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: pivot rightward (pivot out) along the vertical axis. shift to the left. shift to the right. 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: pivot rightward (pivot out) along the vertical axis. shift to the right. shift to the left. pivot rightward (pivot out) along the horizontal axis.

If the price of lattes, a normal good you enjoy, falls the income and substitution effects offset each other but the price effect leads you to buy more lattes. the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more lattes purchased. the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more lattes purchased. both the income and substitution effects lead you to buy more lattes.

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: shifts to the left. pivots rightward (pivot out) without a change in the intercept on the horizontal axis. shifts to the right. pivots leftward (pivot in) without a change in the intercept on the horizontal axis.

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

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

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

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 economic system will be used, how will it be implemented, and who will make market decisions? C. What kind of government will the society have, how will it be run, and who will run it? D. What goods will be produced, how will they be produced, and who will receive the goods?

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

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

Which of the following is likely to cause the demand curve for cars to shift to the left? An increase in the cost of production leading to an increase in the price of cars A rise in the price of cars An increase in the economy's national income A rise in the price of gasoline

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

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

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. $90 C. $250 D. $340

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

The Waco Kid's Cowboy Hats Marginal Cost (dollars) 1st hat $24 2nd hat $30 3rd hat $38 4th hat $46 The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $50, how many hats will be produced? A) 0 B) 1 C) 2 D) 4

D) 4

Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant? Demand is likely to be perfectly inelastic. Demand is likely to be relatively elastic. Demand is likely to be relatively inelastic. Demand is likely to be perfectly elastic.

Demand is likely to be relatively inelastic.

What is the economic definition of utility? Utility is A. the change in enjoyment or satisfaction a person receives from consuming one additional unit of a good or service. B. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. C. the decrease in additional satisfaction consumers receive as they consume more of a good or service during a given period of time. D. the sum of consumer and producer surplus. E. the enjoyment or satisfaction people receive from consuming goods and services. Is it measurable? YES OR NO

E. the enjoyment or satisfaction people receive from consuming goods and services. and NO

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

Even though people may not behave rationally at the time

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

False

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1. Increasing ticket prices will increase the total revenue from ticket sales. True False

False

True or False? The total amount of producer surplus in a market is equal to the area below the supply curve.

False

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

False

T/F Utility refers to how much a consumer will utilize a good or service

False, utility is a measure of enjoyment

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

Households devote a very small portion of their income to salt purchases.

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

If the price of a good is raised and total revenue increases, demand is inelastic.

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

If the price of beef falls, a larger quantity of it will be bought.

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

If the price of iPhones falls, a larger quantity of iPhones will be purchased.

Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true? It is perfectly elastic at very high prices and perfectly inelastic at very low prices. It is inelastic at high prices and elastic at low prices. It is elastic at high prices and inelastic at low prices. It is unit elastic throughout the demand curve.

It is elastic at high prices and inelastic at low prices.

The extra cost associated with undertaking an activity is called

Marginal Cost

The best alternative use of a resource is referred to as its:

Opportunity Cost

The highest valued alternative that must be given up to engage in an activity is the definition of

Opportunity cost

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

Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.

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

Pizza

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

Raising the tax on gasoline raises the selling price of gasoline.

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

Rational economic agents maximize more than just monetary income.

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

Reverse causality

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? Sales revenue increased. Sales revenue decreased. Sales revenue remained unchanged. It cannot be determined without information on prices.

Sales revenue decreased.

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

Scarcity necessitates that people make trade-offs.

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

Testing with data enables economists to distinguish between good models and bad models.

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

The choices people make to attain their goals, given their scarce resources

Which of the following statements is true about the income elasticity of demand? The income elasticity of demand for inferior goods is always zero. The income elasticity of demand for normal goods is always zero. The income elasticity of demand for inferior goods is always positive. The income elasticity of demand for normal goods is always positive.

The income elasticity of demand for normal goods is always positive.

Which of the following statements correctly differentiates between the slope of the demand curve and price elasticity of demand along a linear demand curve? 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. The price elasticity of demand is a ratio, whereas the slope of a demand curve is a product. The price elasticity of demand is a product, whereas the slope of a demand curve is a ratio. 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.

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.

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

The price of gasoline is too high.

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

The price of wheat is too low.

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? The supply curve shifts to the left. The quantity of titanium demanded and the quantity of titanium supplied both increase. The supply curve shifts to the right. The demand curve shifts to the left.

The supply curve shifts to the left.

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? The supply curve shifts to the right. The demand curve shifts to the right. The supply curve shifts to the left. The quantity of platinum demanded and the quantity of platinum supplied both increase.

The supply curve shifts to the right.

(T/F) "An increase in the price of gasoline will increase the demand for hybrid vehicles." This statement is an example of a positive economic statement

True

Marginal cost is the additional cost to a firm of producing one more unit of a good or service. True False

True

Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product. True False

True

When voluntary exchange takes place, both parties gain from the exchange

True

Which of the following statements is CORRECT? When supply decreases, both the price and the quantity decrease. When supply increases, the quantity increases and the price falls. When demand decreases, both the price and the quantity increase. When demand increases, both the price and the quantity decrease.

When supply increases, the quantity increases and the price falls.

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

When we assume the managers at Microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationality.

is it necessary for all economic systems to limit services, such as health care? YES OR NO

YES

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. scarcity. B. economics. C. rationality. D. the market.

If the demand and supply curves for a commodity both shift to the left and the shift in demand is less than the shift in supply, then in comparison to the initial equilibrium, the new equilibrium will be characterized by: the same price and quantity. a lower price and a higher quantity. a higher price and quantity. a higher price and a lower quantity.

a higher price and a lower quantity.

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 higher quantity and price. a lower quantity and a higher price. the same quantity and a lower price. a higher quantity and the same price.

a higher quantity and the same price

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

a larger quantity of off-road vehicles supplied.

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

a larger quantity of pineapples supplied.

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

a simplified description, or representation, of reality.

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

a. Positive analysis b. Normative analysis c. Positive analysis d. Normative analysis

The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market. below; below above; below above; above below; above

above; below

Marginal benefit is equal to the ________ benefit to a consumer receives from consuming one more unit of a good or service. unintended total surplus additional

additional

Trinh quits his $80,000 minus−aminus−year job to become a fullminus−time volunteer at a museum. What is the opportunity cost of his decision?

at least $80,000

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

buyers of steel are more sensitive to a price change if they have more time to adjust to the price change.

If teachers put too much weight in the grading scale on a certain part of the course, like readings outside the textbook, students might respond by ____ other parts of the course

de-emphasizing

Each point on a ________ curve shows the willingness of consumers to purchase a product at different prices. demand supply production possibilities marginal cost

demand

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

demand for a good increases and the supply of it decreases.

A service station owner in Staten Island, New York, was worried that raising the price of gasoline would cause the quantity demanded to fall by so much that he would be in a worse situation than if he did not raise the price. If raising the price of gasoline would cause the owner to receive less total revenue from the sale of gasoline, the demand for gasoline is elastic. perfectly inelastic. unit elastic. inelastic.

elastic.

If a 1% change in the price of a good causes a 1% change in the quantity demanded, the good has an elasticity of demand: equal to 0. greater than 1. equal to 1. less than 1.

equal to 1.

The opportunity cost of going to an outdoor music festival is

equal to the highest value of an alternative use of the time and money spent on the festival.

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

extra satisfaction received from consuming one more unit of a product.

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

generates enjoyment of satisfaction

Centrally planned economies allocate resources based on decisions by _________ (government / households / firms), while market economies answer these questions through decisions made by ________ (government / households and firms).

government; households and firms.

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

greater than 1.

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 elastic. perfectly elastic. inelastic. unit elastic.

inelastic.

If a good has a price elasticity of demand of -3, it implies that: if the price of the good increases by 3%, the quantity demanded of the good will increase by 1%. if the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%. if the income of the consumer increases by 1%, the quantity demanded of that good will increase by 3%. if the income of the consumer increases by 3%, the quantity demanded of that good will increase by 1%.

if the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%.

Teachers often wish that students came to class prepared having read the upcoming material. A teacher could design the grading system to motivate students to come to class prepared by ___ the grade weight assigned to being prepared. increase or decrease

increase

Opera Estate Girls' School is considering increasing its tuition to raise revenue. If the school believes that raising tuition will increase revenue it is assuming that the demand for attending the school is inelastic. unit elastic. elastic. perfectly elastic.

inelastic.

If a good has a negative income elasticity of demand, this indicates that the good is normal. a complement with another good. inferior. a substitute with another good.

inferior.

A supply schedule is a table that shows the relationship between the price of a product and the quantity of the product supplied. is the relationship between the supply of a product and the cost of producing the product. 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. is a curve that shows the relationship between the price of a product and the quantity of the product supplied

is a table that shows the relationship between the price of a product and the quantity of the product supplied.

A perfectly elastic demand curve: slopes upward. is parallel to the quantity axis. slopes downward. is parallel to the price axis.

is parallel to the quantity axis.

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

less than one.

The difference between the ________ and the ________ from the sale of a product is called producer surplus. cost to produce a product; profit received cost to produce a product; price a firm actually receives highest price a firm wold have been willing to accept; lowest price it was willing to accept lowest price a firm would have been willing to accept; price it actually receives

lowest price a firm would have been willing to accept; price it actually receives

The difference between the ________ and the ________ from the sale of a product is called producer surplus. cost to produce a product; profit received highest price a firm wold have been willing to accept; lowest price it was willing to accept lowest price a firm would have been willing to accept; price it actually receives cost to produce a product; price a firm actually receives

lowest price a firm would have been willing to accept; price it actually receives

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

make themselves as well off as possible.

John has two hours of free time this evening. He ranked his alternatives, first go to a concert, second go to a movie, third study for an economics exam, and fourth answer his e-mail. What is the opportunity cost of attending the concert for John?

movie

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: people are rational. people respond to economic incentives. optimal decisions are made at the margin. equity is more important than efficiency.

people are rational.

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

people with health insurance are more likely to be overweight than people without health insurance.

Cross-price elasticity of demand is calculated as the percentage change in quantity supplied divided by percentage change in price of a good. percentage change in quantity demanded of one good divided by percentage change in price of a different good. percentage change in quantity demanded divided by percentage change in price of a good. percentage change in quantity sold divided by percentage change in buyers' incomes.

percentage change in quantity demanded of one good divided by percentage change in price of a different good.

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

portray reality in all its minute details.

Total revenue equals price per unit times quantity supplied. change in price per unit times quantity sold. price per unit times change in quantity sold. price per unit times quantity sold.

price per unit times quantity sold.

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. rationally equitably selfishly emotionally

rationally

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

relatively elastic.

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 relatively elastic. unit elastic. perfectly elastic. relatively inelastic.

relatively inelastic.

If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage, then demand is perfectly elastic. relatively inelastic. relatively elastic. unit elastic.

relatively inelastic.

A ________ curve shows the marginal cost of producing one more unit of a good or service. demand marginal benefit supply production possibilities

supply

Marginal cost is the total cost of producing one unit of a good or service. the average cost of producing a good or service. the additional cost to a firm of producing one more unit of a good or service. the difference between the lowest price a firm would have been willing to accept and the price it actually receives.

the additional cost to a firm of producing one more unit of a good or service.

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then aspirin has few substitutes. the demand for aspirin is inelastic. aspirin is a normal good. the demand for aspirin is elastic.

the demand for aspirin is inelastic

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

the increase in quantity sold is large enough to offset the lower price.

Consumers are willing to purchase a product up to the point where: the marginal benefit of consuming a product is equal to its price. the consumer surplus is equal to the producer surplus. the marginal benefit of consuming the product is equal to the marginal cost of consuming it. the marginal benefit of consuming the product equals the area below the supply curve and above the market price.

the marginal benefit of consuming a product is equal to its price.

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

the measurement of slope is sensitive to the units chosen for price and quantity

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

the price of the good changes.

Elasticity is: the ratio of the percentage change in two variables. the sum of the percentage change in two variables. the product of the percentage change in two variables. the difference of the percentage change in two variables.

the ratio of the percentage change in two variables.

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

the supply curve for oranges has shifted to the right.

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

the supply of peaches has decreased.

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

there is a mutual relationship between both the variables.

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

undertake activities that benefit others and hurt themselves.

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

when there is a decrease in supply and a decrease in demand for the product.

On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is

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