econ 251 exam 1

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A supply curve that illustrates the law of supply​ _______.

shows that the quantity supplied increases as the price rises

A demand curve that illustrates the law of demand​ ______.

shows the quantity demanded decreases as the price rises

A choice on the margin is a choice that is made by comparing all the relevant​ _____ systematically and​ _____.

​alternatives; incrementally;

In March 2017​, the money price of a carton of milk was ​$1.76 and the money price of a gallon of gasoline was ​$2.39. Calculate the relative price of a gallon of gasoline in terms of milk.

1.36 cartons of milk

Which of the following statements is an example of elasticity of supply​?

A 10 percent fall in the price of turkey with no other change decreases quantity supplied by 12 percent.

Consider the influences on selling​ plans, and whether the influence changes supply.

A change in the price of rubber balls changes the quantity supplied of rubber balls.

​_______ is the social institution that helps the U.S. economy achieve allocative efficiency that Cuba might lack.

Property rights

Which of the following examples describes macroeconomics​?

The U.S. unemployment rate has increased by 0.4 percent.

Calculate the cross elasticity of demand for apple juice with respect to the price of orange juice.

The cross elasticity of demand for apple juice with respect to the price of orange juice is 3

Calculate the cross elasticity of demand for a​ full-size pickup with respect to the price of gasoline

The cross elasticity of demand for a​ full-size pickup with respect to the price of gasoline is negative 0.50

Which of the following is an example of an incentive​?

all conference volunteers would be offered free lunch on all three days

The demand for pens is elastic at​ _______.

all prices greater than​ $6 a pen

​______ is an example of​ ______.

bus driver; labor

If a drought is forecast and dairies raise their expected price of​ low-fat milk next​ year, the supply of​ low-fat milk​ ______ .

does not change today because​ low-fat milk cannot be stored and sold later

Which one of the following news headlines definitely concerns the social​ interest?

e coli results must be posted on beaches

The benefit of something is the​ _____. Benefit is determined by preferences​ - by what a person​ _____ and the intensity of those feelings.

gain or pleasure it​ brings; likes and dislikes

So​ ______ has a comparative advantage in producing​ ______.

jacob;pickerel

Economics​ _______.

a subject that studies choices

The money price of a pound of bananas is ​$0.40 and the money price of a pack of granola bars is ​$1.20. The opportunity cost of a pack of granola bars is​ _______.

3.00 pounds of bananas​, which is the relative price of a pack of granola bars

Both Mia and Mario produce only the item in which they have a comparative advantage. Then they trade one pasta for one pizza. Before specialization and trade​ started, Mia and Mario were each producing 4 dishes of pasta and 4 pizzas an hour. The total gains from trade are​ ______ dishes of pasta and​ ______ pizzas an hour.

4,4

Martha can produce 90 quilts or 180 batches of chocolate chip cookies in a month. Jane can produce 6 quilts or 18 batches of chocolate chip cookies in a month. Distinguish between comparative advantage and absolute advantage. _______ has an absolute advantage in both goods.

Martha

Which of the following illustrates scarcity​?

Megan wants to buy a CD that costs​ $25 but has only​ $10 to spend.

Calculate the elasticity of demand when the price rises from ​$4 to ​$6 a pen. Over what price range is the demand for pens​ elastic?

The elasticity of demand when the price rises from ​$4 to ​$6 a pen is 0.72

Faced with high gas​ prices, Americans are substituting smaller cars for SUVs. In April​ 2008, Toyota Yaris sales increased 46 percent and Ford Focus sales increased 32 percent from a year earlier. Sales of SUVs decreased by more than 25 percent in 2008 and Chevrolet Tahoe sales fell 35 percent.​ Full-size pickup sales decreased more than 15 percent in 2008 and Ford​ F-Series pickup sales decreased by 27 percent in April 2008. The effect of a downsized vehicle fleet on fuel consumption is unknown. In​ California, gasoline consumption decreased by 4 percent in January 2008 from a year earlier. The price of gasoline in January 2008 increased by about 30 percent from a year earlier.

The cross elasticity of demand for a Chevrolet Tahoe with respect to the price of gasoline is negative 1.17

Calculate the elasticity of supply when the price rises from​ $125 to​ $135 a pair. Calculate the elasticity of supply when the average price is​ $125 a pair.

The elasticity of supply when the price rises from​ $125 to​ $135 a pair is 3.25 - The elasticity of supply when the average price is​ $125 a pair is 3.58

Brazil produces ethanol from sugar at a cost of​ $0.83 per gallon. The United States produces ethanol from corn at a cost of​ $1.14 per gallon. Sugar grown on one acre of land produces twice the quantity of ethanol as the corn grown on an acre. The United States imports 5 percent of its ethanol consumption and produces the rest itself. Since​ 2003, U.S. ethanol production has more than doubled and U.S. corn production has increased by 45 percent.

The opportunity cost of producing ethanol has increased since 2003.

A 5 percent rise in the price of orange juice decreases the quantity of orange juice demanded by 20 percent and increases the quantity of apple juice demanded by 15 percent. Calculate the price elasticity of demand for orange juice and the cross elasticity of demand for apple juice with respect to the price of orange juice.

The price elasticity of demand for orange juice is 4.0

William Gregg owned a mill in South Carolina. In December​ 1862, he placed a notice in the Edgehill Advertiser announcing his willingness to exchange cloth for food and other items. Here is an​ extract: 1 yard of cloth for 1 pound of bacon 2 yards of cloth for 1 pound of butter 4 yards of cloth for 1 pound of wool 8 yards of cloth for 1 bushel of salt Calculate the relative price of 1 pound of butter in terms of pounds of bacon. If the price of butter is ​$0.30 a​ pound, what do you predict is the money price of a pound of wool​?

The relative price of 1 pound of butter is 22 pounds of bacon. If the price of butter is ​$0.30 a​ pound, you would predict that the price of a pound of wool is ​$0.60

Is the supply of jeans​ elastic, inelastic, or unit​ elastic?

The supply of jeans is elastic

Which of the following is the opportunity cost of attending a ball​ game?

The things you would have bought with what you spent on the ticket and bus fare getting to the game plus the things you would alternatively have done with your time.

Sales of Spam are rising as consumers realize that Spam and other​ lower-cost foods can be substituted for costlier cuts of meat as a way of controlling their already stretched food budgets. Spam is​ ______ good because​ ______.

an​ inferior; as the income available to buy meat​ decreases, consumers buy more spam

Social institutions such as​ firms, markets, property​ rights, and money​ _______.

are necessary to make decentralized coordiantion work

Marginal benefit is the​ _____ that arises from one unit​ _____ in an activity.

benefit; increase

The marginal benefit of a good or service is the​ _____

benefit received from consuming one more unit of it.

Rational choice is a choice that uses the available resources to​ _____ of the person making the choice.

best achieve the objective

The price of food increased during the past year. a. Explain why the law of demand applies to food just as it does to other goods and services.

both a substitution effect and an income effect

A market is an arrangement that brings​ _____ together and enables them to get information and do business with each other.

buyers and sellers

Marginal benefit from food crops​ ______

cannot be calculated from the table because marginal benefit is unrelated to production possibilities

What generates economic​ growth? Economic growth comes from​ _______

capital accumulation and technological advance

Property rights are legally established titles to the​ ownership, use and disposal of​ _____ and goods and services that are enforceable in the courts.

factors of production

When a surplus​ arises, the price​ ______ to its​ equilibrium, which​ _______.

falls; increases the quantity demanded and decreases the quantity supplied

A tradeoff is​ _______.

giving up one thing to get something else

Capital accumulation is the​ _____, including​ _____ capital.

growth of capital​ resources; human

The law of demand states that other things remaining the​ same, the​ _______ the price of a​ good, the​ ______

higher; smaller is the quantity demanded

What does the income elasticity of demand​ measure? The income elasticity of demand is a measure of the responsiveness of the demand for a good or service to a change in​ ______, other things remaining the same.

income

As the average income in China continues to​ increase, explain how the following will​ change: a. The demand for beef b. The demand for rice As the average income in China continues to​ increase, we would expect the demand for beef to​ _______ and the demand for rice to​ _______.

increase if beef is a normal​ good; decrease if rice is an inferior good

Why does economic growth destroy and create​ jobs? As a country experiences economic​ growth, investment in capital and advances in technology​ _________.

increase industrial production but decrease industrial jobs. Jobs are created in the service industry but many workers lack the necessary skills or are unwilling to relocate

Online movie rental service Netflix has introduced a new feature to allow customers to watch movies and television series on their personal computers. Netflix competes with video rental retailer​ Blockbuster, which added an online rental service to the​ in-store rental service. The offering of online movie viewing​ ______ the price elasticity of demand for​ in-store movie rentals.

increases

If a new technology lowers the cost of producing ice​ cream, the supply of​ low-fat milk​ ______

increases because the supply of ice cream increases and​ low-fat milk is complement in production of​ cream, a factor of production of ice cream

The shorter the time that has elapsed since a price​ change, the more​ _______.

inelastic is demand

b. Explain how the substitution effect influences food purchases when the price of food rises and other things remain the same.

its relative price​ rises; purchase more of a different food that is less expensive

​______ earns​ ______.

jeff bezos; profit

a movie star is an example of the factor of production​_______

labor

Factors of production are grouped into four​ categories, which are​ _______.

land, labor,​ capital, and entrepreneurship

The marginal benefit curve is a curve that shows the relationship between the​ _____.

marginal benefit from a good and the quantity consumed of that good

______ has a comparative advantage in quilts.​ ______ has a comparative advantage in chocolate chip cookies.

martha; jane

Economics is used as a policy tool when economists​ _______.

model different economic proposals proposed by government

To disentangle cause and​ effect, economists use economic models and use​ _______ to test the predictions of those models

natural​ experiments, statistical​ investigations, and perform economic experiments

Which of the following news headlines does not deal with​ scarcity?

netflix stock soars to new high

The quantity demanded of a good or service is​ _____

not necessarily the same as the quantity actually bought

Marginal benefit from a good or service is the benefit received from consuming​ ______. It is measured by the most that people are willing to pay for​ ______

one more unit of​ it; an additional unit of it

An economic model is a description of some features of the economic world that includes​ _____ features assumed necessary to explain the​ _____facts.

only​ those; observed

The marginal cost of a good or service is the​ _____

opportunity cost of producing one more unit of it

Marginal cost is the​ _____ that arises from one unit​ _____ in an activity.

opportunity​ cost; increase;

Which of the following examples describes microeconomics​?

people prefer buying iphones over nokia phones

Preferences are​ _____.

people's likes and dislikes and the intensity of those feelings

The price elasticity of demand is calculated by dividing the​ _______ by the​ _______

percentage change in the quantity​ demanded; percentage change in the price

For 50​ years, Cuba has had a centrally planned economy in which government makes the big decisions on how resources will be allocated. We would expect​ Cuba's production possibilities​ (per person) to be smaller than those of the United States because Cuba​ _______.

produces a greater proportion of consumption goods than capital​ goods, so its PPF does not shift outward as quickly as the PPF in the United States

Economics is the​ _____ the choices that​ individuals, businesses,​ governments, and entire societies make as they​ _____, and the influences on those​ choices, and the arrangements that coordinate them.

social science that studies; cope with scarcity

which of the following statements are normative: 1- we ought to have a cure for cancer 2- people who buy weekly lottery tickets win a prize at least once a year 3- most household work is done by women 4- greece is the best place to vacation

statements 1 and 4 are normative

choose correct statements: a) there is no relationship between the opportunity cost of producing an additional good measured on the x axis and the opportunity cost of producing an additional good measured on the y axis b) opportunity cost of a good is the decrease in the quantity porduced of one good divided by the increase in the quantity produced of another good as we move along the ppf c) opportunity cost is a ratio d) opportunity cost of a good is the increase in quanitty produced of one good divided by the decrease in quantity

statements b and c are correct

Economic growth is defined as the ​ _____ .

sustained expansion of production possibilities

What does the supply curve tell us about the​ producer's minimum supply​ price?

tells us the lowest price at which someone is willing to sell

A demand curve​ _______.

tells us the maximum that someone is willing to pay for an additional unit of a good or service

Technological change is​ _____ new goods and of​ _____ of producing goods and services.

the development​ of; of better ways

The opportunity cost of producing an additional ton of food crops is equal to​ ______.

the inverse of the opportunity cost of producing an additional barrel of ethanol

What is the distinction between a money price and a relative​ price? Consider the money price of a gallon of gasoline and the relative price of a gallon of gasoline. The relative price of a gallon of gasoline in terms of a pound of bananas is​ ______.

the money price of a gallon of gasoline divided by the money price of a pound of bananas

The elasticity of supply is calculated by dividing​ ______ by​ ______.

the percentage change in the quantity​ supplied; the percentage change in the price

Elasticity of supply measures the responsiveness of the quantity supplied to a change in​ ______, when all other influences on selling plans remain the same.

the price of a good

c. Explain how the income effect influences food purchases and provide some examples of the income effect.

the price rises relative to​ income; cannot afford to buy all the things they previously​ bought, so they normally buy less of the food that has experienced the price rise

Firms are institutions that organise​ _____ of goods and services.

the production

Define the price elasticity of demand and show how it is calculated.

the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same

The flows in the market economy that go from firms to households are​ _______. The flows in the market economy that go from households to firms are​ _______.

the real flows of goods and services and the income flows of​ wages, rent,​ interest, and​ profit; the real flows of​ labor, land,​ capital, and entrepreneurship and the flow of expenditure on goods and services

The relative price of a pack of granola bars is an opportunity cost because​ ______.

the relative price tells us how many pounds of bananas we must give up to get a pack of granola bars

Allocative efficiency occurs when​ _____

we are producing at a point on the PPF such that marginal benefit at the quantity produced equals marginal cost

Allocative efficiency is a situation in which the quantities of goods and services produced are those that people​ _____ - it is not possible to produce more of a good or service​ _____ some of another good that people​ _____.

value most​ highly; without giving​ up; value more highly

Why do we need a​ units-free measure of the responsiveness of the quantity demanded of a good or service to a change in its​ price? Because elasticity is a​ units-free measure of the responsiveness of the quantity demanded of a good or service to a change in its​ price, _______.

we can compare the responsiveness of the same good when quantity is measured in different​ units, or we can compare across different goods

Why do we need a​ units-free measure of the responsiveness of the quantity supplied of a good or service to a change in its​ price? Because elasticity of supply is a​ units-free measure of the responsiveness of the quantity supplied of a good or service to a change in its​ price, _______.

we can compare the responsiveness of the same good when quantity is measured in different​ units, or we can compare across different goods

The what​, how​, and for whom questions in economics are questions about​ ______.

what goods and services do we​ produce, how do we use the factors of production to produce these​ goods, and who consumes the goods and services that are produced

All of the following are consequences of scarcity faced by people in the United States except deciding​ _______.

whether a tomato is a fruit or a vegetable

If the money price of bacon was 20¢ a pound and the money price of salt was​ $2.00 a​ bushel, people​ _____ buy bacon and trade it for cloth because​ ______.

would; they could buy 8 yards of cloth for only​ $1.60, and use that cloth to obtain a bushel of salt

Which of the following is money​?

​Charlie's checking account deposit at the Bank of America.

Pam, Pru, and Pat are deciding how they will celebrate the New Year. Pam prefers to go on a​ cruise, is happy to go to​ Hawaii, but does not want to go skiing. Pru prefers to go​ skiing, is happy to go to​ Hawaii, but does not want to go on a cruise. Pat prefers to go to Hawaii or to take a cruise but does not want to go skiing.

​Pam, Pat, and Pru face a tradeoff.

This PPF​ ______ illustrate scarcity because​ ______.

​does; the firm cannot produce points outside the frontier and as the firm moves along the PPF​, it cannot produce more dog biscuits without producing less cat food

Why is the demand for a luxury generally more elastic​ (or less​ inelastic) than the demand for a​ necessity? Demand for a luxury is more​ ______ than demand for a necessity because a luxury has​ ______ substitutes

​elastic; more

Most​ likely, the United States​ ______ achieved production efficiency in its manufacture of ethanol and​ ______ achieved allocative efficiency in the production of ethanol.

​has; has not

The law of supply states that other things remaining the​ same, the​ _______ the price of a​ good, the​ _____

​higher; greater is the quantity supplied

In the summer of​ 2008, the price of crude oil hit a record high above​ $135 a barrel. OPEC reported that there was no shortage of oil and that speculators had forced the price up.

​increases; decreases

With this new​ technology, the opportunity cost of producing a ton of trout ​______ and the fish farm is​ ______ efficient.

​increases; equally

The fewer the substitutes for a good or​ service, the more​ ______ is the demand for it. The smaller the proportion of income spent on a​ good, the more​ ______ is the demand for it.

​inelastic; inelastic

​[Study ranks] Honolulu number 3 in the world for the most unaffordable housing market in urban​ locations, behind Los Angeles and San Diego and is deemed​ "severely unaffordable." With significant constraints on the supply of land for residential​ development, housing inflation has resulted. The supply of housing in Honolulu is​ ______. The​ ______ elastic the supply of​ housing, the greater the rise in the price of housing when demand increases.

​inelastic; less

The cost of regenerating East London​ ______ an opportunity cost of hosting the 2012 Olympic Games​ ______.

​is; if the regeneration of East London would not occur unless London hosted the 2012 Olympics

The opportunity cost of catching a pound of pickerel is​ ______ for Jacob than for Zeb​, and the opportunity cost of picking a pound of bananas is​ ______ for Jacob than for Zeb.

​lower; higher

the income elasticity of demand for Spam is​ _______ because as income​ falls, the quantity of Spam demanded​ _______.

​negative; increases

The cross elasticity of demand for online movies and​ in-store movie rentals is​ ______. The cross elasticity of demand for online movies with respect to​ high-speed internet service is​ ______.

​positive; negative

When a shortage​ arises, the price​ ______ to its​ equilibrium, which​ _______.

​rises; decreases the quantity demanded and increases the quantity supplied

Think of examples of goods whose relative price has risen or fallen by a large amount. In​ 2007, the price of a gallon of gas was​ $2.59. In​ 2017, the price of a gallon of gas was​ $2.32 In​ 2007, the price of a dozen eggs was​ $1.63. In​ 2017, the price of a dozen eggs was​ $1.40. Between 2007 and​ 2017, the relative price of a gallon of gas with respect to a dozen eggs​ _______ and the relative price of a dozen eggs with respect to a gallon of gas​ _______.

​rose; fell


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