ECON 202 Study Guide- Exam 1

If a demand curve is downward sloping, a decrease in supply with no change in demand will lead to a(n) _____ in the equilibrium quantity and a(n) _____ in the equilibrium price.

decrease; increase

Alex and Marilyn started Ono Yo, an organic and fresh fruit frozen yogurt truck. As the demand for organic and healthier desserts rose, demand for Ono Yo's products grew. Because of the growth in demand for Ono Yo's product, Alex's and Marilyn's

demand for workers increased.

Economists

do not measure utility. It is a hypothetical measure used for modeling behavior.

The price elasticity of demand for snowboarding lessons at Jay Peak resort in Vermont is greater than 1. This means that the demand for snowboarding lessons is _____.

elastic

Economists assume that rational behavior is useful in explaining choices people make

even though people may not behave rationally all the time.

Which factor would cause a DECREASE in the supply of soy candles?

expectations that the price of soy candles will rise

marginal benefit

extra benefit you get from one more worker

If quantity supplied does not respond substantially to a relatively large change in price, supply is:

inelastic

If demand is _____, a higher price yields _____ total revenue.

inelastic; higher

Demand for soda outside an airport is more elastic than inside of the airport because:

more choices makes demand more elastic.

The opportunity cost principle states that the true cost of something is the

next best alternative you have to give up to get it.

In addition to financial costs and benefits, assessing your willingness to pay allows you to convert _______ costs or benefits into their monetary equivalent.

nonfinancial

The labor supply curve for social workers will shift to the right when:

nonwage benefits increase for social workers.

Which example best represents perfectly inelastic supply?

original paintings made by Leonardo Da Vinci

The marginal product of labor is how much an additional unit of labor affects

output.

The opportunity costs of attending college include the:

potential income that could be earned working.

If baseball bats and toothpicks are substitutes in production, a producer (with her fixed set of resources) will need to reduce the production of baseball bats when she:

produces more of the other good.

Paint and paintbrushes are complements. If the price of paint rises, we can expect:

the demand for paintbrushes to decrease.

marginal cost

the extra cost of adding one unit

In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit

the supply curve shifted to the left resulting in an increase in the equilibrium price.

The price elasticity of demand for an item is impacted by:

the time available to adjust to price changes. whether or not the item is a necessity. the number of available substitutes. all of these options.

When an employer makes decisions based on statistical discrimination, it is:

using observations about the average characteristics of a group to make inferences about an individual.

To maximize profits when hiring employees, continue to hire workers until

wage equals marginal revenue product.

The cost of working one more hour is

the hour of leisure that is given up.

substitution effect

upward sloping

Your employer has asked you to start working overtime and has offered to pay $18 per hour for every hour you work beyond forty hours a week. The wage rate for each of the first forty hours will continue to be the usual $15 per hour. In terms of dollars, what is the marginal benefit of working each hour of overtime?

$18

Jonathan's income falls by 15%. He decides to cut down his purchases of high-end restaurant meals by 20%. His income elasticity of demand for high-end restaurant meals is:

1.33.

A Smoothie King manager has estimated that the price elasticity of demand for exotic fruit smoothies is 2. If the store increases menu prices by 5%, she can expect the quantity of exotic fruit smoothies sold to decrease by _____ and total revenue to _____.

10%; fall

If income rises by 10% and the quantity demanded of an item rises by 20%, the income elasticity of demand for this item is:

2

The price elasticity of supply for a good is 2 if a _____ in price leads to a 4% decrease in the quantity supplied.

2% decrease

The price of cakes rises by 15%. In response, the quantity supplied of cakes rises by 30%. The price elasticity of supply for cakes is:

2.

Which of the following is an example of statistical discrimination?

An employer relies on stereotypes in making hiring decisions.

Interdependency Three: Dependencies Between Markets

Choices are also interdependent across different markets. In particular, changes in prices and opportunities in one market affect the choices you might make in other markets.

Which of the following statements identifies a difference between correlation and​ causation?

Correlation implies a mutual relationship between two​ things, whereas causation occurs when one thing directly affects another.

_____ is a measure of how much your decision has _____ your well-being.

Economic surplus; increased

Which of the following scenarios depicts a rational buyer?

Damien chooses to buy a sandwich for $5 when the marginal benefit of the sandwich to him is $7.

income effect

Downward sloping

Which of the following scenarios does not illustrate the law of demand?

Freya buys more doughnuts when the price of doughnuts is higher.

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.

Which of the following scenarios illustrates the law of demand?

Kathleen eats more steak when the price is low, and less when the price is high.

Which of the following is a valid explanation of why a star movie actor earns many times more than a star Broadway actor?

In one evening, many more people can view a movie than can see a Broadway play.

What do economists mean when they say behavior is "rational"?

Individuals making choices which help them reach their goals.

What is quantity supplied?

It is the amount of an item that a seller is willing to sell at a particular price.

How is the economic surplus generated by a decision calculated?

It is the total benefits minus total costs arising from the decision.

What will happen in the market for nurses in the United States if capital equipment replaces nurse labor to monitor vital statistics on patients in hospitals?

Labor demand will decrease, resulting in lower wages and fewer hours of employment for nurses.

Which of the following is an example of a labor market characterized by compensating differentials?

Outside window washers of skyscrapers earn higher salaries than outside window washers of single family homes.

Interdependency One: Dependencies Between Your Own Choices

Since you have limited resources, every choice you make affects the resources available for every other decision

Employers using a characteristic of a group to make inferences about an individual's skills is

Statistical Discrimination

Which of the following are true of statistical discrimination? There may be more than one correct answer.

Statistical discrimination occurs when employers discriminate against job candidates based on an irrelevant but observable characteristic which correlates to an unmeasurable but relevant characteristic. "Ban the box" laws not allowing employers to ask potential employees whether or not they have been in jail is increasing discrimination against Black men, particularly those without a college degree.

Economic models are typically based on the principle that people behave rationally. However, people do not always behave rationally. Which of the statements is NOT a reason why economists still consider their models valid, in spite of the irrationality of people?

The existing models have been in place for so long, they are considered untouchable, the equivalent of an economic law.

Which of the following is not a demand shifter?

The price of the product.

The U.S. Bureau of the Census reported that, on average, white men earn $50,945 , whereas white women earn $31,008.Economic discrimination explains at least some of this wage gap, but economists think that there are other factors that also contribute to wage gaps. Which factor is not an explanation offered by economists for these types of wage gaps?

There are innate differences between men and women that make men more productive than women. Because men are more productive, they earn more on average.

Suppose the price elasticity of demand for lemons is 1.8. If a fall frost destroys one-third of the nation's lemon crop, how will that affect total revenue from lemons, all other things equal?

Total revenue will fall.

Suppose the labor market for electricians is in equilibrium. Which event might DECREASE the wage of electricians?

Unemployed manufacturing workers attend technical schools to learn the electrician's trade.

_____ is estimated by asking: "What is the _____ I am willing to pay to get this benefit (or avoid that cost)?"

Willingness to pay; most

If the price elasticity of demand for air travel is 4:

a 20% decrease in the price of air travel will increase quantity demanded by 80%.

A firm's demand curve for labor will shift because of:

a change in the demand for a firm's product.

Instead of studying for an additional two hours for the economics final, Leann decides to watch a movie. Leann is making

a rational decision if her marginal benefit from the movie is greater than her marginal cost.

If the price is above the equilibrium price, then:

a surplus exists.

If the price of airline tickets goes up, there will be

an increase in the demand for both bus and train tickets.

Which factor would result in a decrease in the supply of linen shirts?

an increase in the price of linen fabric

Joshua Murphy is planning on studying late into the night for his economics exam. He is contemplating how many coffees to buy tonight. Joshua should not buy an additional coffee during the evening if the marginal

benefit of purchasing one more coffee is less than the marginal cost.

Price takers

charge the prevailing prices and do not have any effect on the market price.

Supply curves tend to be _____ the more time producers have to adjust to price changes

flatter

An item has utility for a consumer if it

generates enjoyment or satisfaction.

interdependence principle

recognizes that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future.

The income effect of an increase in the price of salmon

refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant.

Sunk costs are costs that are incurred

regardless of which decision is made.

Rising input costs lead to

rising marginal costs for a seller.

Opportunity cost arises from the fundamental economic problem of

scarcity

There are limited resources to satisfy all of society's wants.

scarcity

Price elasticity of supply measures how responsive:

sellers are to price changes.

The opportunity costs of a decision may include each of the following types of costs EXCEPT

sunk costs.

Assuming that farmers can easily stock beef or pork, if the price of beef decreases, you can expect the

supply of pork to increase.

Suppose the price of real estate increases by 37.11% in New York City next year. If the quantity of new homes supplied does not change, the price elasticity of _____ will be perfectly _____ in New York City next year.

supply; inelastic

Discrimination that occurs because the discriminator dislikes another person's gender, race, or some other personal characteristic is known as

taste-based discrimination.

On a hot sweltering day, you feel thirsty and buy an ice-cold soft drink, which you gulp down. Whether you buy the second drink or not, will depend on

the marginal benefit from the second soft drink and if it will outweigh the price of the soft drink.

Samia has decided that with the two hours in between classes she can do one of 3 things. She has ranked her choices, from highest to lowest as, (1) chat with her friends, (2) study economics or (3) take a nap. The opportunity cost of chatting with her friends is

the value of studying economics, the next best use of time.

When people make rational choices, they

weigh the costs and benefits of their options and act to satisfy their wants.

Economists convert costs and benefits into money equivalents by evaluating an individual's

willingness to pay.

Utility is

a measure of consumer satisfaction.

Kathleen Alvarado is binge-watching her favorite show on Netflix. She is trying to decide how many more episodes to watch. Kathleen should continue watching episodes unless the marginal

benefit of watching another episode is equal to the marginal cost.

Diane Jacobs is a student studying economics and currently working on her class schedule for next semester. When she considers taking another economics course rather than taking a math class in the same time slot, she is acknowledging that dependencies exist

between her own choices.

Diminishing marginal benefit

can be observed in the downward slope of the demand curve.

Rosalie and Henry work at a nursery where they grow sunflowers. Rosalie works all day in the hot sun, planting and harvesting sunflowers, where she earns $34 per hour. Henry, on the other hand, works inside the air conditioned warehouse, drying and roasting sunflower seeds, and earns $22 per hour. Which source of wage differences is exemplified by the example?

compensating differentials

A linear demand curve has:

elastic, inelastic, and unit-elastic segments.

When faced with a quantity decision, the economic surplus stops increasing when

marginal benefits equal marginal costs.

Carlo implemented some management changes that increased worker productivity in his company. This increased the _____ and led him to _____ workers.

marginal revenue product of labor; hire more

Economic models do all of the following except

portray reality in all its details.

Dependencies between various people's choices reflect the fact that

society has limited resources.

You have been appointed head of marketing for Barry's Younique Yachts. Barry, the CEO, is interested in determining whether offering his yachts at a lower price would increase the firm's revenue. He asks you for advice. Using your knowledge of elasticity, you should tell Barry

that he should reduce his prices. Yachts are luxury goods and therefore exhibit a high price elasticity of demand. Thus, reducing prices would increase revenue.

Which scenario BEST illustrates a wage disparity due to differences in human capital?

People with graduate degrees usually earn more than people who did not graduate from high school.

Discrimination that exists as a result of an individual having a dislike towards members of a particular group is-------This type of discrimination is also referred to as taste-based discrimination.

Prejudice

When would you see the greatest gain if there is a compensating differential built into your salary?

The differential is for a large negative risk that you don't care about as much as most people do.

Ron is buying jeans online and has to decide how many to buy. He should buy an additional pair if the

marginal benefit of the next pair is at least as high as the price of the jeans.

Labor demand is based on _____, and labor supply is based on _____.

marginal revenue product; opportunity costs

When a government imposes penalties on both sellers and buyers of an illegal good, the price of the good ________ and the quantity ________.

might rise, fall, or not change; decreases

If the market for bison meat is in equilibrium, the price of bison meat will probably _____ in the near future

not change

Ivan has inherited his grandmother's 1963 Chevrolet Corvette, which he values at $50,000. He decides that he might be willing to sell it, so he posts it on Craigslist for $55,000. Samantha is interested and willing to pay up to $72,000 for such a car. A voluntary economic exchange _____ between Ivan and Samantha because _____ positive economic surplus from the transaction.

occurs; both Ivan and Samantha receive

If the price of emergency visits to the dentist rose, we would expect:

only a slight decline in the number of emergency visits to the dentist.

Which factor does NOT determine the price elasticity of demand?

the slope of the supply curve

The price elasticity of demand for gasoline tends to be rather inelastic as:

there are few or no available substitutes.

An upward-sloping supply curve shows that

there is a positive relationship between price and quantity supplied.

Market equilibrium occurs when:

there is no incentive for prices to change in the market. the market clears. quantity demanded equals quantity supplied.

In a perfectly competitive labor market, employers will not pay less than the market wage because at a wage below the equilibrium

they would not be able to hire anyone.

The market supply is the

total quantity produced by all sellers in the market at each price.

In a perfectly competitive labor market, employers will not pay more than the market wage because:

plenty of good workers are available at the market wage.

The cost of your favorite coffee is $6.50 per cup at the coffee shop. The marginal cost of each cup you drink is _____. The first cup of coffee you drink gives you a marginal benefit of $8. The marginal benefit from the second cup is $6, $4 from the third, $2 from the fourth, and $0 from the fifth. You should drink _____ cups of coffee.

$6.50; one

A supply curve (i) plots the quantities a seller is willing to sell at different prices. (ii) shows the total cost to the seller. (iii) shows rising marginal costs. (iv) shows rising fixed costs.

(i) and (iii)

If income rises by 20% and the quantity demanded of an item falls by 20%, the income elasticity of demand for this item is:

-1.

Butter producers know that the price elasticity of demand for butter is 0.2. If they want to increase sales by 4%, they will have to lower price by:

20%.

Carolyn Bates is a junior in college studying economics. She has created a new software application that applies the four principles of economic decision making to any potential decision that a user faces. She is considering leaving school after this academic year to pursue further development of her app. Carolyn should consider all of the following costs when calculating the opportunity costs of leaving college EXCEPT the

90 credit hours she has already completed for her degree.

Interdependency Four: Dependencies Over Time

As a consumer, you always face the option of buying something tomorrow, rather than buying it today. And similarly, as an executive, you get to choose when to produce goods and when to bring them to market.

Which of the following most resembles a case of taste-based discrimination (prejudice)?

Austin has a deep-seated hatred of bald-headed men and refuses to hire any to work at his car wash.

Which of the following scenarios describes a business that is NOT following the law of supply?

Automobiles fall in price, and Maria's Autorama Ltd. is now willing to sell more vehicles.

Why are city gun buyback programs unlikely to work?

Because the supply of guns in a city is very elastic, so more guns are brought in to meet the increase in demand from the gun buyback program.

Which of the following is the best definition of the opportunity cost of a decision?

Benefits from the best foregone alternative.

A bakery hires a baker who can make 15 cakes per day. The bakery then decides to hire a second baker who will use the kitchen at the same time as the first baker. The bakery finds that the second baker can produce only an additional nine cakes per day. What concept does this scenario illustrate?

Diminishing marginal product

Which of the following best defines economics?

Economics studies how to make the best choice when coping with scarcity.

Which of the following would shift both the labor supply curve and the labor demand curve?

Employers begin covering the cost of better health insurance for all employees.

Better management increases worker productivity in the labor market for factory production line workers. What will happen in the labor market for production line workers?

Labor demand will increase, resulting in higher wages and more hours of employment for the workers.

What is the impact of higher wages on labor supply according to the income effect?

Leisure is more attractive.

Interdependency Two: Dependencies Between People (or Businesses)

The choices made by other economic actors—people, businesses, governments, or other groups—shape the choices available to you.

What happens in the labor market for custodians in Indonesia when the population of Indonesia grows?

The custodian labor supply curve shifts rightward.

Jordan's Photography Studio pays its workers $60 per day and sells poster-size prints for $10 each. Suppose that, during the holiday season, the price of poster-size prints increases to $12 due to a shift in the demand for the product. What happens?

The demand for labor increases.

In their pursuit of profits, entrepreneurs act in ways that reduce discriminatory wage differentials. There are times, however, when the profit motive is not powerful enough to overcome wage differentials that arise from discrimination. Which of the statements exemplifies one of the most important limits to a competitive market's ability to eliminate discriminatory wage differentials?

The government bans the hiring of workers with brown eyes.

In economics, what is meant by "optimal decisions are made at the margin?"

The idea of the margin is related to making decisions while thinking about the benefits and costs of small changes in behavior.

What will happen in the labor market if employers increase the amount of paid vacation days each year?

There will be a rightward shift of the labor supply curve.

Why are supply curves typically upward-sloping?

They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services.

The price of coffee at a local coffee shop is $2.50. Cheryl is willing to pay $8 for her first cup of coffee each day. The marginal benefit to her of each additional cup of coffee falls by $2. How many cups of coffee should Cheryl purchase?

Three

Which statement best characterizes the relationship between the elasticity of demand, price, and total revenue?

When demand is elastic and price falls, total revenue rises.

Economists use money equivalents to compare costs and benefits because money is

a common measuring stick.

Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase?

a decrease in the price of flour

If there is a technological advance in the production of the Amazon Echo smart speaker, you would expect to see _____ overtime.

a fall in its equilibrium price

The market supply is

a graph that plots the total quantity of an item supplied by the entire market at each price.

An individual supply curve is

a graph with quantities of a product that a seller is willing to supply at different price points.

If the supply and demand curves intersect at a price of $25, then any price below that price would result in:

a shortage.

The cost-benefit principle will lead you to make unselfish decisions if you

account for unselfish motivations.

Complements-in-production

allows a business to produce goods together.

In a market economy, there is relationship between the price of a good and the amount of a good that buyers are willing and able to purchase.

an inverse or negative

If the price of a good increases by 15%, and quantity demanded changes by 5%, then the price elasticity of demand is equal to:

approximately 0.33.

Sunk costs are costs that

are incurred in the past and cannot be reversed.

The law of demand says that

as the price of a good increases, buyers are willing and able to purchase less.

Graphically, shortages will always occur:

at prices below the equilibrium price.

The key to using the cost-benefit principle is to think about _____ aspects of a decision.

both financial and nonfinancial

In a voluntary economic transaction between a buyer and a seller, _____ can earn economic surplus from the transaction.

both the buyer and the seller

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because

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

The Rational Rule for Buyers

compares the benefit of buying an additional unit of the item to the cost of that item.

A police officer on the evening shift may earn more than one who works the day shift because of:

compensating differentials.

Jenna is a concert pianist. A grand piano is a _____ to her labor in the production of her concerts.

complement

A decrease in the demand for pastry chefs may come about because of an increase in:

concerns about healthy living.

Damon's wage falls. The substitution effect would cause him to _____ his work hours, and the income effect would cause him to _____ his work hours.

decrease; increase

Telefon, a wireless communications company, tested the effect of a reduction in the price of its monthly service. Telefon lowered its rate from $36 to $30 per month and found that the number of users tripled. This means that the:

demand for cell phone service is elastic in this price range.

The law of demand says that, holding everything else constant, when the price of a good increases, the amount buyers buy will decrease, and when the price of a good decreases, the amount buyers buy will increase. To hold everything else constant means to use the ceteris paribus condition. If we change one of these things we were holding constant, which is the most likely result?

demand for the good will either increase or decrease

When a government fines and/or imprisons persons convicted of using illegal drugs, the government is attempting to decrease the illegal drug trade by shifting the ________ curve for illegal drugs ________.

demand; leftward

Marginal utility is the

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

If penalties are imposed only on the buyers of illegal drugs, the equilibrium price of illegal drugs will ________ and the equilibrium quantity will ________.

fall; decrease

An omitted variable is a variable​ that:

has been left​ out, and if​ included, would explain why the variables considered in a study are correlated.

Companies that engage in workplace discrimination are likely to

have lower profits when they compete against other firms that do not discriminate.

Attitudes or stereotypes that affect our understanding, actions, and decisions in an unconscious manner are

implicit bias

Nora, the manager of three hospital rehabilitation clinics, has the clinics adopt software that allows better tracking of supplies. This software adoption also allows therapists to spend less time gathering supplies for therapy sessions. On average, each therapist can meet with one more patient per day. The marginal revenue product of the therapists will _____, and the demand for therapists at the clinics will _____.

increase; increase

Milk is an inexpensive good that most would consider a necessity. You would therefore expect its demand to be:

inelastic.

The price elasticity of demand for canned fruit is calculated as 0.75. Given this, demand is:

inelastic.

You manage a restaurant, and lately revenues have been rather poor. One of your waiters suggests that raising food prices will increase revenues, but your chef suggests that decreasing food prices will increase revenues. You aren't sure who is right, but you know that your waiter believes that the demand for your food is _____, and your chef believes that the demand for your food is _____.

inelastic; elastic

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle.

interdependence

Diminishing marginal benefit:

is when buying an additional item yields a smaller marginal benefit than the previous item.

economic surplus

it is a measure of how much your decision has improved your well-being

The demand for labor is described as a derived demand because

it is derived from the demand for products that use labor in the production process.

If a seller expects prices to rise in the future

it will stock up today and sell the goods when the price rises.

Harry Watson is an engineering student taking an economics elective in his senior year. He has the option to work as a petroleum engineer or to design rollercoasters after college. He uses concepts learned from his economics course to help with this decision. When he considers the increasing popularity of electronic vehicles and a decrease in demand for petroleum in the future, he is acknowledging the dependencies that exist

over time

The interdependence principle states that your best choice today depends on all of the following EXCEPT

past decisions you have made.

marginal principle

that decisions about quantities are best made incrementally

An individual demand curve is a graph:

that plots the quantity of an item that someone plans to buy, at each price.

The marginal cost of an additional worker is

the additional cost of hiring one more worker.

The marginal cost of an additional worker is the change in

the company's total cost when one extra worker is hired.

One reason why the average salary of Major League Baseball players is higher than the average salary of college professors is

the marginal revenue product of baseball players is greater than the marginal revenue product of college professors.

Every person, no matter how rich or poor, is faced

with situations that require trade-offs.

The price of product A is cut by 50%. As a result, the quantity demanded of product B rises by 50%. The cross-price elasticity of demand between product A and product B is _____, and they are _____.

-1; complements

The state of Texas recently saw a gasoline price increase of 5%, which brought about a fall in the quantity of gasoline purchased of 1%. The price elasticity of demand is equal to _____, and demand is described as _____.

0.2; inelastic

Which of the following is most likely to be an example of​ causation?

A firm producing CFLs installs new machinery. The​ per-day production of CFLs increases.

If Tesla cars become less expensive, what will happen in the market for other electric cars?

The demand for other electric cars will fall.

Alena manages a small theme park. She hires one more custodian at $450 per week, and her park is cleaner and more attractive. As a result of this improvement, ticket sales rise by 40 tickets per week. Tickets sell for $12. Use the Rational Rule for Employers to determine if hiring the extra custodian was a good move.

Yes, it was a good move because it added more to revenue than to cost.

Suppose that you have a pumpkin stall at a farmer's market, and the Halloween season arrives. You know that your customers will want to buy many pumpkins to decorate their houses and make pumpkin pies. Which of the following is a likely result of this scenario?

You can charge a higher price per pumpkin.

The cost benefit principle

costs and benefits are the incentives that shape decisions. says that you should buy the coffee if the benefit is at least as large as the cost.

Compensating differentials lead to:

higher salaries for more unpleasant jobs.

Compensating differentials are

higher wages that compensate workers for unpleasant aspects of a job.

The substitution effect of a higher wage measures

how people respond to a change in relative prices.

When economists use the term "correlation," they are referring to

how two variables move together in a predictable way.

The slope of a demand curve is not used to measure the price elasticity of demand because

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

opportunity cost

the most desirable alternative given up as the result of a decision

A shift in the demand for labor will NOT occur if:

the price of labor falls.

A profit-maximizing firm, operating in a perfectly competitive market, will add new units of labor until the

value of the marginal product equals the wage.

If the price of herring increases by 8%, and the quantity demanded falls by 20%, demand is _____. This increase in price will therefore lead to a _____ in total revenue.

elastic; decrease

If an increase in the price of coconut oil brings about an increase in total revenue, then the percent rise in price is _____ in magnitude than the percent decline in quantity demanded.

larger

In general, the long-run price elasticity of demand for a good tends to be _____ the short-run price elasticity of demand for it.

larger than

Holding everything else constant, producers are willing to offer more units for sale when the price at which they can sell their product increases. This concept is known as the

law of supply.

If a company incurs expenses to start providing childcare at work so that employees can have lunch with their preschool children, the company's demand curve for labor will shift to the

left because employees are more expensive to the firm.

Undesirable job features lead to a ________ labor ________.

lower; supply

Alan Patel is a college student living alone in a campus apartment. He finished cooking dinner when his friends text him to join them at the dining hall on campus for dinner. He now has to decide whether to eat the dinner he prepared or walk to campus to meet his friends at the dining hall. Alan should consider all the following costs when making this decision EXCEPT the

money spent on the groceries he used to cook dinner.

Scarcity results from the fact that

people's wants exceed the resources available to satisfy them.

The marginal revenue product is equal to the marginal

product of labor multiplied by the price of that product.

Income elasticity of demand measures how responsive the:

quantity demanded of a good is to changes in income.

If a firm produces a product that has easily available variable inputs, its supply curve will be:

relatively flat.

If an item is a necessity rather than a luxury, its demand curve will be:

relatively steep.

Taking the absolute value of the cross-price elasticity of demand is incorrect because it would:

remove the ability to tell whether the two products are substitutes or complements.

The value of the marginal product of labor is the marginal product of labor multiplied by

the price of the item the firm produces.

Demand is best described as

the quantity of a good or a service that people are willing and able to purchase at different possible prices.

Utility is the measure of

the satisfaction a good or service gives to the consumer.

Suppose the percent change in the quantity demanded for water for any price change is zero. The demand curve for water is _____, and the price elasticity of demand is perfectly _____.

vertical; perfectly inelastic

Economists assume that people's goals are to

make themselves as well off as possible.

Making the buying and selling of a good illegal shifts the demand curve ________ and shifts the supply curve ________.

leftward; leftward

Comparing the benefits and costs of engaging in an activity.

trade-off

Everything you do requires giving up something (time, money, etc.).

tradeoffs

Two products have a cross-price elasticity of demand of 1.5. Based on this value of cross-price elasticity, which of the following products are they most likely to be?

two competing brands of soft drinks