ECON 2306 CH 2

Which of the following illustrates the law of demand? More people watch college basketball in March than in November. The number of long distance calls in the United States is greater on Christmas than on Valentine's Day. College enrollment increases when federal tuition grants are readily available to students. The prevailing wage rate in an industry determines how many people choose to work in the industry.

College enrollment increases when federal tuition grants are readily available to students.

Which of the following is the best example of scarcity? The Talking Teddy is a surprise holiday hit, resulting in long lines of consumers trying to purchase the limited number of available Teddies. Fred only gets a 10-hour lunch break and each day must decide between working out at the gym or socializing with his colleagues. The local market's buy-one-get-one-free sale on strawberries results in more people wanting the berries than producers are able and willing to supply. There is a bumper crop of strawberries, and stores have more berries than they can sell.

Fred only gets a 10-hour lunch break and each day must decide between working out at the gym or socializing with his colleagues.

The price of a new textbook increased by 25 percent and the price of a used textbook increased by 30 percent. What happened to the relative price of the new textbook? It increased by 5 percent. It increased, but we can't tell by how much without more information. It decreased by 5 percent. It decreased, but we can't tell by how much without more information.

It decreased, but we can't tell by how much without more information.

Which of the following will cause a movement along the demand curve instead of a shift of the demand curve? income tastes and preferences Expectations e the future price of a good None of these

None of these

Which of the following must occur as a result of ceilings on apartment rents that are set below market clearing rental rates? Property owners respond to the ceilings by increasing maintenance and repairs. Property owners respond to the ceilings by constructing new apartment buildings. There is a decrease in the quantity of apartments that prospective tenants wish to rent. There is a decrease in the quantity of apartments that property owners offer for rent.

There is a decrease in the quantity of apartments that property owners offer for rent.

What happens as the result of a shortage? There is downward pressure on prices. There is upward pressure on prices. Consumers begin to view the good as an inferior good because they have a hard time finding it. Supply of the good decreases.

There is upward pressure on prices.

John has decided to view the solar eclipse tomorrow. The eclipse is an example of a good. an economic good. a service. entrepreneurship.

a good.

A price floor represents a maximum price that can be legally charged for a product or service. a minimum price that can be legally charged for a good or service. a lottery imposed upon producers by the government. a first come, first served mechanism for controlling prices.

a minimum price that can be legally charged for a good or service.

Suppose the market clearing price for gasoline is $3.75 per gallon. Now suppose that policy makers pass a law requiring that the maximum price that can be charged is $2.75 per gallon. Such a situation is an example of a price control that will lead to a surplus of gasoline on the market. a price floor that will lead to a shortage of gasoline on the market. a price ceiling that will lead to a shortage of gasoline on the market. a price floor that will lead to a surplus of gasoline on the market.

a price ceiling that will lead to a shortage of gasoline on the market.

When the government sets a maximum price that can be charged for a good or service, it creates a price support. a price floor. a white market. a price ceiling.

a price ceiling.

The market clearing price of corn has just increased. Which of the following could have caused this change? a reduction in demand a reduction in supply an increase in quantity demanded an increase in quantity supplied

a reduction in supply

The production possibilities curve represents the total amount of stocks and bonds that exist in the economy. the trade-off between human capital and physical capital that exists. all possible combinations of total output that can be produced. society's needs.

all possible combinations of total output that can be produced.

The decrease in the price of gasoline to a national average of less than $3.20 during the summer of 2012 was most likely a result of an increase in demand due to reduced summer driving. an increase in supply resulting from higher refinery output. an increase in demand due to increase in summer driving along with a decrease in supply resulting from reduced refinery output. an increase in supply resulting from higher refinery output along with a decrease in demand in summer driving.

an increase in supply resulting from higher refinery output.

Which of the following would cause an increase in the market supply of mountain bikes? a decrease in the demand for mountain bikes an increase in taxes levied on mountain bike manufacturers an increase in the cost of components used to assemble mountain bikes an increase in the number of firms making mountain bikes

an increase in the number of firms making mountain bikes

Capital goods are a special type of consumption goods. are consumed because they enhance the enjoyment consumers obtain from other goods and services. are goods used to make consumer goods and services. lead to inward shifts of a production possibilities curve.

are goods used to make consumer goods and services.

A change in the ceteris paribus conditions for supply will lead to a change in quantity supplied. change in supply. change in quantity supplied and a change in supply. change in how consumers view the quality of the good.

change in supply.

All of the following are examples of physical capital EXCEPT buildings. machinery. company stocks and bonds. a hydroelectric power plant.

company stocks and bonds.

Price floors provide free market incentives for producers. create surpluses by setting the price above equilibrium. create shortages by setting the price above equilibrium. are used by advocates of the free market.

create surpluses by setting the price above equilibrium.

The trade-off between current consumption and the production of capital goods is also a trade-off between the future cost for capital goods and future cost of consumption goods. having fewer needs and more wants in the future. satisfying the needs of the poor and the wants of the wealthy. current consumption and future consumption.

current consumption and future consumption.

Kariuki decreases his consumption of grapes after his income goes up. For Kariuki grapes and income are substitute goods. grapes and income are complementary goods. grapes are an inferior good. grapes are a superior good.

grapes are an inferior good.

Graphically, the market supply curve is obtained by changing the ceteris paribus conditions. a change in quantity supplied. horizontally summing quantity supplied at various prices for individual producers. vertically summing quantity supplied at various prices for individual producers.

horizontally summing quantity supplied at various prices for individual producers.

In order for an economy to increase its production possibilities, the economy must be very efficient. increase inputs. increase its wants. reduce output.

increase inputs.

The opportunity cost of going to college for a student receiving a scholarship is the income that she would have earned if she did not go to college. is the risk of dropping out. is the food and living expenses that she has to purchase while in college. is zero because she does not have to pay tuition.

is the income that she would have earned if she did not go to college.

Bonnie volunteers to help make floral arrangements at a flower shop. She is an example of entrepreneurial ability. labor. physical capital. human capital.

labor.

Generally, if a nation produces more consumer goods than capital goods more of all goods may be produced in the future. less of all goods may be produced in the future. about the same amount of capital goods may be produced in the future as are being produced today. society will have to forego future consumption of capital goods.

less of all goods may be produced in the future.

The saying that "You cannot have your cake and eat it too" illustrates the economic concept of a positive statement. a normative statement. physical capital. opportunity cost.

opportunity cost.

The production possibilities curve bows outward because opportunity costs are decreasing as the production of a good increases. opportunity costs are increasing as the production of a good increases. opportunity costs are fixed as the production of a good increases. resources are of uniform quality.

opportunity costs are increasing as the production of a good increases.

An increase in supply, other things being equal, will cause which of the following to occur? quantity supplied to decrease. quantity demanded to increase. a rightward shift in the demand curve as the price falls. a leftward shift in the demand curves as the price increases.

quantity demanded to increase.

The "real" price of a good is known as The absolute price of the good. the dollar price of the good since we use dollars in the United States. relative price of the good. the price actually paid for a good instead of the sticker price.

relative price of the good.

The most basic concept in economics is wealth. income. scarcity. spending.

scarcity.

A movement along the production possibilities curve would imply that the labor force has grown. productivity has increased. society has chosen a different set of outputs. productivity has declined because workers are demanding more leisure.

society has chosen a different set of outputs.

Which of the following is a non-price determinant of supply? the price of related goods consumers may buy technological advances in production consumers' incomes You Answered the number of consumers

technological advances in production

Suppose Brad Pitt and Angelina Jolie wear matching platinum jewelry in their new movie. After the movie is released, suppose that consumers increase their demand for the jewelry and at the same time manufacturers increase the supply of the jewelry. As a result the equilibrium quantity will increase, and there is an indeterminate change in the equilibrium price. the equilibrium quantity and price are both indeterminate. the equilibrium quantity will decrease, and the equilibrium price will increase. the equilibrium price and quantity will both decrease.

the equilibrium quantity will increase, and there is an indeterminate change in the equilibrium price.

The trade-off between the present and future consumption is measured by the money cost of both the present and future consumption. the foregone present consumption. the difference between the money price of future goods and the money cost of producing them. the difference between the money price of present goods and the money cost of producing them.

the foregone present consumption.

An outward bowed production possibilities curve illustrates inefficient production. the law of increasing additional cost. a lack of scarcity. zero opportunity cost of moving from inefficient production to currently unobtainable production.

the law of increasing additional cost.

The direct relationship between changes in price and changes in quantity supplied is a change in supply. shown by a shift in the supply curve. the law of supply. the law of relative production.

the law of supply.

Production is efficient when it generates a point beyond the production possibility curve. the maximum output possible is being produced given current levels of resources and technology. technological change occurs. the maximum amounts of the most important good are produced.

the maximum output possible is being produced given current levels of resources and technology.

When Adam Smith's ten pin workers specialized, they were able to increase output of pins in a day from 200 to 48,000. One reason for the increase in pin output was due to the time saved when workers do not need to shift from one task to another. the boredom the workers suffered when they stopped making a whole pin and only concentrated on one task such as painting the heads white. new machinery. the bonus they received when they produced more pins.

the time saved when workers do not need to shift from one task to another.

An improvement in technology will shift the production possibilities curve to the left. along the curve. inward. to the right.

to the right.

When productive activities are organized according to the principle of the division of labor scarcity is eliminated. we do not devote enough resources for capital investment. total output increases due to the advantages of specialization. an inefficient outcome results.

total output increases due to the advantages of specialization.

A point outside a society's production possibilities curve is one that is unattainable given the resources of the society. technologically inefficient. undesirable given the implied underemployment of resources. desirable since it satisfies the desires of the population.

unattainable given the resources of the society.

In the labor market, adjustments to changes in supply and demand usually occur instantly. usually take time to occur. do not apply, since the labor market does not respond to supply and demand forces. do not apply, since wages in the labor market always go up.

usually take time to occur.

Specialization can occur because governments pass laws that require it. varying skills differentiate workers. absolute advantage creates specialization among laborers. managers and laborers share job tasks.

varying skills differentiate workers.

Comparative advantage is when a country can produce a good at a lower opportunity cost compared to other countries. when a country can produce all goods more quickly than any other country. when the production possibilities curve shifts outward to the right.

when a country can produce a good at a lower opportunity cost compared to other countries.