econ chapters 1-3
the defining feature of a demand curve is that it is ____
downward sloping
economic models
simplify the real world by ignoring minor details
a firm owned by one person with unlimited liability is a
sole proprietorship
the total cost for 15 units is $150 and the cost of the 15th unit set itself is $20. the marginal cost of the 15th unit is
$20
if the demand function is Qd= a-b*p and the supply function is Qs= r+s*p then the equilibrium price is equal to
(a-r)/(s+b)
increased consumption of natural foods by pet owners has led to increased demand for natural foods for their pets. the Colgate-Palmolive company produces and sells hells science diet cat food. suppose that you work for a similar company also producing scientific cat food
-top management could consider rebranding their cat food with a name that emphasizes its natural attributes -top management could shift production toward natural cat foods and use marketing that emphasizes the natural asapects of their products -the demand for scientific cat food decreases, so the demand curve shifts to the left
if the price in a market is less than the equilibrium price, what happens to restore the equilibrium price
-whenever the product is offered for sale, it rapidly sells out -managers find it hard to keep the product in inventory, so they raise the price -the price continues to rise until it reaches the equilibrium price
cigna corporation can sell one of its buildings for $50 million. cignas most profitable investment opportunity has an annual profit of 10%. the building will fall in value to $48 million after a year. cigna could rent the building for an annual rent of $6 million. based on 1-year returns, what is cignas opportunity cost of using the building
50 million * .10 = 5 million
according to the law of demand _____ increases the quantity of tires demanded
a fall in the price of car tires
an increase in the price of dry cleaning results in
a movement up along the dry cleaning supply curve
in a supply function for leather purses, the price of leather will have
a negative coefficients
opportunity cost is hard to measure
but managers who use it have more accurate cost estimates
In Venezuela, residents must stand in long lines to buy diapers in drug stores but can buy then at a much higher price from venders selling them at busy street corners. the most likely explanation for this situation is
a price ceiling that has been set below the equilibrium price
a minimum wage is an example of
a price floor if it is set above the equilibrium wage rate and a price ceiling if it is set below the equilibrium wage rate
the equilibrium price of a loaf of bread in Venezuela is 222 bolivars per loaf, and the government has set a price ceiling of 120 bolivars per loaf. consequently, there is
a shortage of bread
a price floor set above the equilibrium price creates
a surplus
how does an advance in technology affect the supply curve
an advance in technology shifts the supply curve to the right
you are a manager at KB home, a major homebuilder. of the following options, what combination of changes in the market for plywood will increase your costs the most
an increase in demand and a decrease in supply
if small-screen televisions are an inferior good then
an increase in income decreases the demand for small-screen tvs and the demand curve shifts to the left
which of the following changes increase demand and shifts the demand curve to the right
an increase in income if the product is a normal good
a movement upward along the demand curve for tangerines is the result of ____
an increase in the price of tangerines
in the demand function Qd= r-s*p the coefficient(s)
are r and s
which of the following goods are complements
baseball gloves and baseball bats
if a manager chooses the amount of an action that sets the marginal benefit of the action equal to its marginal cost than: i: all the units for which the marginal benefit exceeds the marginal cost are undertaken ii: none of the units for which the marginal benefit is less than the marginal cost are undertaken
both i and ii are correct
according to the definition of a firm, the American cancer society
can be considered a firm
a change in income creates a ___ and ____ the demand curve for cars
change in demand, shifts
which of the following factors does not shift the supply curve of a product
consumers income
under which form(s) of business organization are owners not responsible for the companys debt is the company goes bankrupt
corporation and LLC
a minimum wage set above the equilibrium wage rate
creates unemployment
accounting cost ____ depreciation as the change in market value of the asset and ____ the wages paid workers
does not measure, includes
marginal analysis recognizes that
decisions have both marginal benefits and marginal costs
each hour a store remains open it incurs a marginal cost, if the marginal benefit of staying open does not change but the marginal cost doubles, then the manager will _____ the hours the store remains open
decrease
if people switch their drinking habits from soda to energy drinks, then the quantity of soda ___ and the quantity of energy drinks ___
decreases, increases
the ____ shows the maximum price consumers are willing to pay for each until of a product
demand curve
accounting cost and opportunity cost differ when it comes to measuring
depreciation
using the demand and supply functions, once the equilibrium price is known the equilibrium quantity can be determined by using the equilibrium price in
either the supply function or the demand function
at the equilibrium price, the equilibrium quantity is
equal to the quantity supplied and to the quantity demanded
total revenue
equals P*Q, where P is the price and Q is the quantity sold
suppose you are a manager for SolarWorld, and you know that over the next two years more companies will start producing solar panels. as a result, your planning is based on the prediction that the price of solar panels will ___ over the next two years
fall
white bread contains a lot of simple carbohydrates, so if more people limit their intake of simple carbohydrates, the equilibrium price of a loaf of white bread ___ and the equilibrium quantity ___
falls, decreases
if both the supply and demand for rice increase and the increase in supply exceeds the increase in demand, then the equilibrium price of rice ____ and the equilibrium quantity ____
falls, increases
if the supply of corn increases, then the equilibrium price of a ton of corn ___ and the equilibrium quantity ___
falls, increases
if the supply of lobster increases while the demand for lobster decreases, and the change in supply exceeds the change in demand, then the equilibrium price of lobster ____ and the equilibrium quantity ____
falls, increases
ArcelorMittal is the worlds largest steel producer and Netflix is a streaming video service. ArcelorMittal is a firm because it produces a good, but Netflix is not a firm because it doesn't produce a good
false
a change in the "state of nature" affects only the supply of agricultural products
false
a price ceiling set above the products equilibrium price creates a surplus of the product
false
a price ceiling set below the equilibrium price decreases the cost of searching for the product because the price ceiling makes the product less expensive
false
a shift to the right of the supply curve causes the demand curve to shift right
false
a supply curve slopes upward because the increase price, the greater the quantity demanders are willing to buy
false
according to the law of demand, an increase in the demand for a product increases the equilibrium price and decreases the equilibrium quantity
false
an increase in income always shifts the demand curve to the right
false
an increase in income increases both the supply and demand for normal goods, thereby making the change in price ambiguous
false
an increase in income shifts the supply curve of appliances to the right
false
an increase in the cost of producing airplanes is similar to an advance in the technology of producing them: both raise the price of airplanes
false
an increase in the cost of producing honey results in a movement up along the supply curve of honey
false
an increase in the expected future price of oil increases the current supply of oil
false
auto producers can manufacture either heavy trucks or hybirds. an increase in the price of hybirds decreases the equilibrium price of heavy trucks
false
demand curves must be downward sloping straight lines
false
economists call the opportunity cost of using an item in inventory the sunk cost because the cost is already "sunk" into the value of the asset
false
financial market conditions have no effect on the demand for goods
false
if the expected future price of gas falls, the current demand for gas is unaffected
false
in a perfectly competitive market, the consumer surplus is equal to the total surplus
false
in a perfectly competitive market, the producer surplus is always equal to zero because the firms cannot set their own prices
false
in the demand function for skirts, the coefficient on the population will be negative
false
income should be included as a factor in the supply function for computer chips because income affects the demand for these chips
false
managers can rarely use economic models to make business decisions because the models are so simplified
false
marginal analysis concludes that managers should undertake actions as long as the difference between the marginal benefit and marginal cost is increasing
false
producing more than the efficient quantity of a product never creates a deadweight loss for society
false
regardless of any actions the owners take, the managers of for-profit firms always find it in their self-interest to make decisions that maximize the firms profit
false
the accounting cost of depreciation for a machine tool are always larger than the opportunity cost of using the machine tool
false
the equilibrium price is determined using only the demand function, and the equilibrium quantity is determined using only the supply function
false
the equilibrium quantity increases whenever the supply increases, no matter what change might affect the demand
false
the law of supply refers to the joint behavior of both demanders and suppliers
false
the marginal benefit of an action is the same as the total benefit of an action
false
the only difference between accounting cost and opportunity cost is that accounting cost uses no implicit costs
false
the opportunity cost of the owners time is always an implicit cost
false
the terms total revenue and total profit mean the same thing
false
when the price of a good rises, its demand curve shifts to the right
false
whenever both the demand and supply curves shift, without information about the relative size of the shifts, the effect on both the price and quantity are always ambiguous
false
you are a manager at 84 Lumber, a large retailer of wood used to construct houses. if you expect credit market conditions to worsen, your planning should be on the basis of a rise in the price of lumber
false
economic models are useless because they are so abstract and so simple
false because economic models eliminate the confusing clutter of relatively insignificant details
young adult males drink more beer than other age and gender groups. executives at breweries track the demographics of the various nations in which they operate so as to
forecast demand for their product
managerial economics
helps executives manage their firms more efficiently
an ___ cost is defined as a cost that does not involve an outflow of cash
implicit
a technological advance in the production of computer chips
increase the supply of computer chips
an increase in the number of corn producers ____ the supply of corn and shifts the supply curve to the ____
increase, right
older people use more pharmaceutical drugs than younger people. as the number of older people in the U.S. increases, the demand for pharmaceutical drugs ____, thereby causing the price of these drugs to ___
increase, rise
hair stylings are a normal good. in the demand function for hair stylings, the coefficient for income is 50 hair stylings per dollar of income. consequently, a $100 increase in family income
increases the equilibrium quantity by less than (50 hair stylings per dollar) * 1,000 = 50,000 hair stylings
according to the law of supply, a rise in the price of a product
increases the quantity supplied
if the equilibrium price of ammonia is $600 per metric ton and the actual price is $560 per metric ton, the quantity demanded ____ the quantity supplied
is greater than
in a supply function, the coefficient on the price of the product
is positive
an increase in the expected future price shifts the supply curve to the ____ and decreases in the expected future price shifts the supply curve to the ____
left, right
an increase in the price of a substitute in production shifts the supply curve to the ____ and an increase in the price of a complement in production shifts the supply curve to the ____
left, right
over the years, people have decided that it is healthier to eat less beef and more chicken. this belief has shifted the demand curve for beef to the ____ and the demand curve for chicken to the ____
left, right
a price ceiling creates a shortage when it is set
lower than the equilibrium price
a technological advance in the production of computer chips ___ the price of these chips and ___ quantity
lowers, increases
a decrease in demand combined with an increase in supply ___ the price and ___ the quantity
lowers, might increase, decrease, or not change
a decrease in demand combined with a decrease in supply ___ the price and ___ the quantity
might raise, lower, or not change, decreases
an increase in demand combined with an increase in supply ___ the price and ____ the quantity
might raise, lower, or not change, increases
Bauxite is used to produce aluminum. you are a manager for rio tinto alcan, a major aluminum producer. if you think that the demand for bauxite and the supply of bauxite will both increase but you do not know the relative sizes, then you expect that the cost of bauxite
might rise, fall, or not change
if both the supply and demand increase, then the equilibrium price ____ and the equilibrium quantity ___
might rise, fall, or not change, increases
the term change in the quantity supplied refers to a ____ and the term change in supply refers to a ____
movement along the supply curve, shift of the supply curve
in the demand function for movies shown in theaters, if the coefficient on the price of Netflix is positive then
movies and netflix must be substitutes
according to the law of supply, supple curves ____ upward sloping and ____ linear
must be, might be
nearly all large firms are organized as corporations because they
need a perpetual life and limited liability to attract investors
the labor market differs from product markets (such as the market for steel) because in the labor market
none of the above answers are correct
which form(s) of business organization have their profits taxed twice
only corporations
economists assume that the paramount goal(s) of managers of profit-seeking firms is
only profit maximization
an ____ cost is defined as the return from the best-alternative use of a resource
opportunity
managers should use ____ cost when making managerial decisions because it considers the return from alternative uses of the firms resources
opportunity
if coffee is a normal good, then in the demand function for coffee Qd= a-b*p+c*income the coefficient c is
positive
in the demand function for a good, then coefficient on the number of demanders is
positive
an increase in the ____ shifts the supply curve of raisins to the left
price of grapes, an input used to produce raisins
in an agricultural market, to maintain a price floor set above the equilibrium price, the government can use all the following policies except
produce additional units of the product
which of the following statements does not describe the social gains from competitive markets
producing any unit less than the equilibrium quantity maximizes society's total surplus of benefit over cost
the substitution effect means that an increase in the price of beef____
raises its price relative to the price of chicken
gasoline and diesel fuel are complements in production, so a fall in the price of gasoline ___ the price of diesel fuel and ___ the quantity of diesel fuel
raises, decreases
an increase In demand combined with a decrease in supply ___ the price and ___ the quantity
raises, might increase, decreases, or not change
the effect of a decrease in the price of the cheese used to produce pizza would be ____ the ____ curve of a pizza
rightward shift, supply
suppose you are a manager for the Mosaic Company, a major producer of fertilizer. you expect that the number of farms will increase. as a result, you predict that the price of fertilizer will ___ over the next two years
rise
you are a manager for 1-800-flowers.com, a major retailer or rosses. if roses are a normal good and you think peoples incomes will increase this year, you expect that the price of roses will
rise
if jet fuel rises in price, the price of an airline ticket ___ and the quantity of travel by air ___
rises, decreases
if the cost of the corn fed to steers increases, then the price of beef ___ and the equilibrium quantity ___
rises, decreases
demand increases when the price of a substitute ____ and when the price of a complement ____
rises, falls
if the demand for iron ore increases, then the equilibrium price of a ton of iron ore ___ and the equilibrium quantity ___
rises, increases
travel by airline is a normal good, and peoples incomes increase. consequently, the equilibrium price of an airline ticket ____ and the equilibrium quantity ____
rises, increases
if the supply of oil decreases and demand for oil increases, then the equilibrium price of oil ___ and the equilibrium quantity ___
rises, might increase, decrease, or not change
the cost of producing chickens rises and simultaneously more people decide that eating chicken is healthy. consequently, the equilibrium price of chicken ___ and the equilibrium quantity ___
rises, might increase, decrease, or not change
grocery stores must allocate shelf space to different brands. safeway, a large grocery store chain, allocates more space to post cereals
safeways opportunity cost of this action is the foregone profit to safeway that could have been earned on other products
suppose there is a change in peoples preferences in favor of wearing jeans. due to this, the demand curve for jeans will ____ and the supply curve for jeans will ____ suppose there is a decrease in the number of producers of jeans. due to this, the demand curve for jeans will ___ and the supply curve for jeans will ___
shift to the right, be unaffected be unaffectedd, shift to the left
in the supply curve for coal, the coefficient on the wages of miner workers is -10 tons per dollar. if the wages of mine workers rise from $44 to $46 then the supply curve for coal
shifts left by 20 tons of coals
in a supply function for rice, a negative coefficient on the price of fertilizer means that an increase in the price of fertilizer
shifts the supply curve to the left
at any price higher than the equilibrium price, there is a ___ and the price will ____
surplus, fall
which of the following is an opportunity cost of production that is omitted in the accounting cost
the competitive return on the owners invested funds
a decrease in demand means that
the demand curve shifts to the left
you know that both the demand and supply of wheat have increased. you observe that the price rises. you conclude that
the demand for wheat increased more than the supply of wheat
suppose that a competitive market is in equilibrium and the firms in this industry employ many workers who are paid the minimum wage congress now raises the minimum wage that the firms must pay their workers
the equilibrium price in the market will increase and output will decrease consumer surplus will decrease
if the demand function for a product includes both the price of the product and households income while the supply function includes both the price and the cost of producing the product then
the equilibrium price will change if either cost or income changes
a price ceiling is a government regulation that sets
the maximum legal price
the law of demand refers to the relationship between ____ and the quantity demanded of the good or service
the price of a good or service
the law of supply refers to the relationship between
the price of a good or service and the quantity supplied of that good or service
the demand curve of a good or service shifts to the left when
the price of a substitute good falls
Thailand is the source of most of the worlds computer hard drives. heavy rains in Thailand are creating floods that are damaging these factories. as a manager of dell in charge of purchasing computer components, you expect
the price of hard drives will rise due to the decrease in the supply
the total surplus on a pound of rice is the marginal benefit to society of the pound minus the marginal cost to society of producing the pound
true
the fact that processing a chicken produces both chicken breasts and chicken wings means that
they are complements in production
in the demand function for beef, the coefficients on income is 0.002 pounds for beef per dollar of income, if consumers income increase by $10,000 then the demand curve for beef shifts
to the right by 20 pounds
a change in the price of bricks creates a movement along the demand curve for bricks
true
a drought in the corn growing areas in Iowa causes the supply curve of corn to shift to the left
true
a minimum wage set above the equilibrium wage rate creates a surplus of labor
true
a price ceiling set below the products equilibrium price can create a black market for the product
true
a rise in the expected future price of petroleum increases the current demand for petroleum
true
accounting depreciation for an asset is an arbitrary number and is not necessarily related to the assets real depreciation
true
an increase in the number of firms producing generic drugs lowers the price of generic drugs
true
at the equilibrium price, the quantity demanded is equal to the equilibrium quantity
true
bakers can use their equipment to produce either bread or cookies so bread and cookies are substitutes
true
for a price floor to change the quantity produced, the price floor must be set above the equilibrium price
true
generic goods are inferior goods, so an increase in income lowers the price of generic goods and decreases their quantity
true
if both the demand and supply of a good decrease, the price falls only if the decrease in demand is larger than the decrease in supply
true
if demand increases by more than supply increases, the equilibrium price rises
true
if gas is a normal good, then in the demand function for gas the coefficient on income must be positive
true
if the actual price is below the equilibrium price, a shortage forces the price to rise to the equilibrium price
true
if the marginal benefit to a store of staying open an extra hour is less than the marginal cost, the managers should decide to not stay open the extra hour
true
in a supply function, if the coefficient for a factor is negative, then an increase in that factor shifts the supply curve to the left
true
in small college towns with highly ranked football teams, the price of a hotel room rises on weekends with home football games
true
in the demand function Qd= a-b*p the value of b is the change in the quantity demanded when the price changes by 1
true
jet skis are a normal good, so an increase in income combined with an increase in the cost of producing jet skis definitely raises the price of a jet ski
true
moving upward along a supply curve, both the price and the quantity supplied increases
true
no matter what the relative size of the changes, if demand for a product decreases and its supply increases, then the price of the product falls
true
producing the efficient quantity of a product maximizes society's total surplus from the product
true
some workers gain from a minimum wage set above the equilibrium wage rate while other workers lose
true
the equilibrium price is the only price at which the quantity demanded equals the quantity supplied
true
the law of demand means that as the price of a good falls, the quantity demanded increases
true
the law of supply means that an increase in the price of almonds will increase the quantity of almonds supplied
true
the presence of consumer surplus means that some consumers are willing to pay a higher price for a product than the price they currently pay
true
the profit of a limited liability company is taxed once
true
using opportunity cost rather than accounting cost enables managers to make more profitable decisions
true
when the demand and supply functions include factors in addition to the price of the product, the equilibrium price is determined by equating the demand function to the supply function that is Qd=Qs
true
you are a manager for Drexel Heritage, a producer of wooden furniture. if you believe that the demand for wood will increase due to a housing boom, you predict that the price of wood will rise
true
you are a manager for Texas instruments, a major producer of systems on a chip (SoC) used in smartphones, tablets, and similar devices. you predict a massive increase in demand for them, so you expect the price of SoCs to rise
true
suppose that you are a marketing manager for the Keebler company, the largest cookie and cracker manufacturer in the U.S. you determine that the marginal benefit from advertising has increased
using marginal analysis, explain how you will change Keeblers marketing budget: the marketing budget should be increased to increase the marginal cost
an increase in the minimum wage is apt to affect teenagers more than other age groups because they are the age group
with the highest proportion of workers earning minimium wage