Exam 1

What is the difference between a change in quantity supplied and a change in supply?

A change in the market price affects the quantity supplied, but not the supply.

During the recent recession, consumer spending on dogs and cats:

rose even though national income declined

An increase in demand causes the equilibrium price to __________ and the equilibrium quantity to ____________.

rise; rise

A shift downward and to the right of the supply curve may be caused by

subsidies

Quantity Demanded < Quantity Supplied

surplus

If a market is NOT at equilibrium:

the price will change and in response market participants will slide along the existing supple and demand curves until the market reaches equilibrium

When markets are efficient

the sum of consumer and producer surplus is maximized

An increase in the price of ethanol will encourage farmers to produce and sell more corn, so

the supply will increase

When the supply of citrus products decrease:

the whole supple curve shirts upward and to the left

Flu vaccinations provide external benefits. Thus:

too few flu vaccination shots are given

Suppose that a store sells candy bars for $0.89 for one, and $1.50 for two. The marginal cost of the second bar is....

$0.61

Producer surplus is shown graphically as:

above the supply curve and below market price

Markets....

can contain legal or illegal activity conducted by any individual or business

When the supply of surfboards increases and the demand for surfboards falls simultaneously, the price of surfboards will:

fall

In any given market, _____ is determined by "what the market will bear."

price

What drives and disciplines markets?

prices and profits

The market economy is often called the price system because:

prices provide information for both buyers and sellers.

If the price of a good is higher than the equilibrium price...

producers can gain at consumers' expense

If the price of shoes is $60/pair, the _____ will be 10 pairs of shoes.

quantity demanded

Quantity supplied is the:

quantity that producers are willing and able to sell at a given price.

What will increase the commercial air travel?

technology changes that make aircrafts more fuel efficient

Luz sells cupcakes. According to market economics, what is the BEST signal that consumers value her product highly?

that they readily pay $6 per cupcake

Market failure means that:

the market has not provided a socially optimal amount of goods and services.

Macroeconomics is concerned with issues such as....

unemployment

Scarcity is BEST describes as when:

unlimited wants exceed limited resources

An increase in the cost of coffee beans, which is used to make coffee, will cause the _______ for coffee to shift ________.

Supply; left

What represents incentives for decisions?

Tax deductions for individual retirement accounts, investment tax credits for businesses, tax deductions for education savings account.

Bus tickets are often considered _____ goods because _____.

inferior; as income rises, demand for bus tickets falls

Opportunity cost...

influence all economic decisions.

The study of economics....

is about peoples decisions regarding their use of scarce resources

Driving your car in a large city during the rush hour causes externalities because...

it adds to the congestion and pollution

Resources are:

limited but wants are unlimited

The field of economics that is concerned about the broader issues in the economy such as inflation, unemployment, and national output of goods and services is called:

macroeconomics

Economist believe that....

making information available to market participants improves the functioning of the market

Institutions that bring buyers and sellers together so they can interact and transact with each other are called:

markets

Uvaldo is deciding which brand of energy drink to buy. According to market economics, he would benefit MOST from basing his decision on which brand has the:

most value relative to its price

An decrease in Quantity Demanded

movement to the left (up)

An increase in Quantity Demanded

movement to the right (down)

There is a(n) _____ relationship between price and quantity demanded.

negative

What is an example of a market?

neighborhood lemonade stand, ticket scalping, New York Stock Exchange

If an increase in income leads to an increase in the demand for opera tickets, then opera concerts are a(n):

normal good

If society produces a pie at the lowest possible cost and then distributes the pie evenly among its population, then:

only production efficiency is achieved

If one person consumes a public good

others cannot be excluded from enjoying it

If you were not studying economics, you could be doing one of the following: sleeping in ($15), playing cards with your friend ($10), or working ($8). The opportunity cost of studying economics is therefore....

$10

If you are willing to sell you bicycle for $30, but someone offers you $40 for it, the results of the transaction would yield:

$10 worth of producer surplus and unknown consumer surplus

Jason purchased a new printer for $150 although he was willing to pay $175. The minimum price acceptable by the seller, Jasmine, was $145. The results of this transaction are a consumer surplus of:

$25 and a producer surplus of $5

Suppose the market price is $5. The producer who sells the first unit of output has a willingness-to-sell equal to $1; the producer who sells the second unit of output has a willingness-to-sell equal to $2; and the producer who sells the third unit of output has a willingness-to-sell equal to $4. Total producer surplus is:

$8

The Wonderful Widget Company is trying to increase the market price. What is one strategy it can use?

Advertise or change the product to make it more desirable

What affects the supply of new automobiles

An improvement in automobile manufacturing technology, a labor strike in the steel industry, a subsidy for struggling automobile manufacturers.

An increase in the cost of fertilizer will affect the supplier how?

Decrease the supply

_____ is how well resources are used and allocated.

Efficiency

______ is the fairness of various issues and policies.

Equity

Economist understand that people respond to:

Incentives

Quantity D = Quantity S

Market is in equilibrium

Which of the following graphs concerning hamburgers indicates an increase in the quantity demanded of hamburgers?

Movement along the demand curve. Downward

________ occurs when goods are produced at the lowest possible cost, and _______ occurs when individuals who desire a product the most receive those goods and services.

Production efficiency; allocative efficiency

During the recent recession, consumer spending on dogs and cats:

Rose even though national income declined

If bagels and doughnuts are substitute goods, then which of the following is likely to occur if the price of bagels is reduced?

The demand curve for doughnuts will shift to the left

Suppose in the market for iPhones, the following two changes take place: (1) the cost of making iPhones falls and (2) the price of smart-phone data plans fall. What happens to the equilibrium price and the equilibrium quantity?

The equilibrium price is indeterminate and the equilibrium quantity rises.

What is a microeconomic topic?

The price of an iPad sold by Apple

What is a characteristic of economic models...

They try to boil down an economic situation to its most basic elements

What would shift the supply curve for corn to the right?

a decrease in land taxes

Which is one of the four major reasons why markets fail? too much competition, no externalities, a mismatch of information, private ownership of resources.

a mismatch of information

What is a macroeconomic topic?

a study of the business cycle

Marginal analysis would put an emphasis on...

additional cost and benefits

If a pharmaceutical company knows that one of its products has a dangerous side effect, but does not disclose that to its customers, then the market for that product is likely to fail due to:

asymmetric information

Consumer surplus is shown graphically as:

below the demand curve and above market price

Government intervention in the market is helpful when...

business firms engage in production activities that pollute the air and water

Economics is a social science that involves the study of how individuals, firms, and societies:

choose among alternatives to satisfy their unlimited wants

If a restaurant that traditionally has served only lunch and dinner wants to open for breakfast, which of the following factors should be considered?

cost of the additional food

What does not cause an increase in demand?

decrease in the products price

Markets differ in

geographic location, products offered, and size

Economist generally define institutions as all of there, EXCEPT as a

government that controls resource allocation

Suppose that an artist prices his painting at $150, but it remains unsold. We can conclude that the price of $150 is too:

high for this painting and it should be lowered

Prices help consumers decide what...

how much of a product to purchase, how much of a product to substitute for another, and whether to buy a certain product.

Efficiency within economics focuses on

how well resources are used and allocated

What will decrease air travel?

increase in fuel prices, increase in wages of pilots, decrease in the number of companies that offer commercial air travel

A shift to the right of the demand curve could be caused by a(n):

increase in income if the good is normal

Employers give full-time employees that have been on the job more than three years employee stock options. This is an example of:

people following incentives