exam 1

24) Some sales managers are talking shop. Which of the following quotation refers to a change in the quantity demanded?

"We decided to cut our prices, and the increase in our sales has been remarkable."

5. The night before a midterm exam, you decide to go to the movies instead of studying for the exam. You score 60 percent on your exam. If you had studied the night before, you'd have scored 70 percent. What was the opportunity cost of your evening at the movies?

10 percent off your grade.

2. Which of the following is NOT a factor of production?

175 shares of Microsoft stock

7. Suppose that you are spending two hours a day studying economics, and your grade is 85 percent. You want a higher grade and decide to study for an extra hour a day. As a result, your grade rises to 90 percent. Your marginal benefit is the

5-point increase in your grade.

Change in Demand vs. Change in Quantity Demanded

A change in demand is when the whole curve shifts and a change in quantity demanded is movement along the demand curve due to a change in price. Price Doesn't shift the curve.

production possibilities frontier

A model that shows a combination of 2 goods a society can produce at full employment It shows how much can be produced and what can be done to change the production mix and how opportunity cost can increase with specialization

23) Which of the following best reflects an increase in quantity demanded and not an increase in demand?

After-holiday mark downs produce higher sales.

30) Which of the following increases the supply of a product?

An increase in foreign imports of the product.

42) Which of the following correctly describes how price adjustments eliminate a shortage?

As the price rises, the quantity demanded decreases while the quantity supplied increases.

Economic growth

Can happen through international trade or expansion of workers

Change in Supply vs. Change in Quantity Supplied

Change in supply means shift of whole curve, Change in the Quantity Supplied means shift along the curve

Law of supply

How much producers are willing to provide at a higher price; the higher the price is the greater the supply and vice versa

The law of demand

If the quantity of demand goes up, prices decrease and when vice versa

32) Auto workers negotiate a wage increase. How does this wage hike affect the supply of cars?

It decreases the supply.

Resources

Land, labor, ideas, capital

allocative efficiency

Mix of goods and services that is what society desires

Determinants of supply

Production technology Costs of resources Prices and related commodities Expectations Number of sellers Taxes and subsidies

Factors affecting supply

Production technology Resources costs Prices of related commodities Expectations Number of sellers Taxes and subsidies

What factors increase production

Specialization and trade

Non price factors of determinant demands

Tastes and preferences Income Prices of related goods (substitutes and compliments) Number of buyers Expectations about future prices

Comparative advantage

The ability to produce something at a lower opportunity cost

Absolute advantage

The ability to produce something faster than someone else

15) What happens to the demand for Blue Rays if the price of a Blue Ray player falls?

The demand for DVDs increases because the price of a complement falls.

Production efficiency

The goods and services produced at lowest opportunity cost

Supply

The maximum amount of a product that sellers are willing and able to provide at some period at various prices

53) What will happen to the equilibrium price and quantity of coffee if it is discovered to help prevent colds and, at the same time, Brazil and Vietnam emerge in the global market as massive producers of coffee?

The quantity will increase and the effect on the price is uncertain.

28) Which of the following decreases the supply of restaurant meals?

Waiters get a pay raise.

29) It is expected that the price of a bushel of wheat will increase in one month. This belief will result in

a decrease in current supply of wheat.

20) Which of the following changes the demand for oranges?

a decrease in the price of a pound of bananas, a substitute in consumption for oranges

44) Coffee and sugar are complements. If a poor sugar harvest leads to an increase in the price of sugar, there will also be

a decrease in the price of coffee.

43) Which of the following would increase the equilibrium price and increase the equilibrium quantity of used cars?

a fall in income if used cars are an inferior good

36) If the quantity supplied exceeds the quantity demanded, then there is

a surplus and the price is above the equilibrium price.

Horizontal summation

adding the number of units of the product that will be supplied and purchased at each price

19) Which of the following increases the demand for a product?

an increase in the price of a substitute product

22) Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal?

an increase in the price of cold cereal

31) Changes in which of the following changes the supply of hamburgers?

an increase in the price of meat used to produce hamburgers

3. In economics, the term "capital" refers to

buildings and equipment

12) A person has a comparative advantage in producing a particular good if that person

can produce it at lower opportunity cost than anyone else can.

47) When supply decreases and demand does not change, the equilibrium quantity ________ and the equilibrium price ________.

decreases; rises

63) The equilibrium price will fall and the equilibrium quantity might increase, decrease, or stay the same when the

demand for a good decreases and the supply of it increases.

50) Crude oil can be refined into home heating oil or gasoline. If very cold weather caused the price of home heating oil to increase then, the

equilibrium price of gasoline would rise.

54) When demand increases and supply decreases, the

equilibrium price rises, and the equilibrium quantity might increase, decrease, or remain constant.

48) If technological advances lower the cost of computer chips, in the market for computers the equilibrium price will ________ and the equilibrium quantity will ________.

fall; increase

49) If the price of crude oil falls, the equilibrium price of gasoline ________ and the equilibrium quantity ________.

falls; increases

52) Between 2000 and 2008, advances in PC production technology increased the supply of PCs sharply. The demand for PCs also increased, but not nearly as much as the supply did. As a result, the market price of a PC ________ and the quantity of PCs sold ________.

fell; increased

18) Inferior goods are those for which demand increases as

income decreases.

17) An increase the expected future price of a good

increases its demand.

13) The "law of demand" states that, other things remaining the same, the quantity demanded of any good is

inversely related to its price.

1. Economics is best defined as the study of how people, businesses, governments, and societies

make choices to cope with scarcity

26) The "law of supply" states that, other things remaining the same, firms produce

more of a good the higher its price.

Changes in demand

occurs when one or more of the determinants of demand changes, shown as a shift in the entire demand curve

Market equilibrium

occurs when the quantity demanded and the quantity supplied at a particular price are equal

51) Suppose a medical study reveals new benefits to consuming beef and at the same time a bumper corn crop reduces the cost of feeding steers. The equilibrium price of beef will

perhaps rise, fall, or stay the same, but more information is needed to determine which it does.

Law of supply

producers offer more of a good as its price increases and less as its price falls

21) As the price of a pound of peanuts falls, the

quantity of peanuts demanded increases.

16) The demand for a good increases when the price of a substitute ________ and also increases when the price of a complement ________.

rises; falls

45) Suppose that people find out that eating more fish improves their health, leading them to increase their demand for fish. As a result, the equilibrium price of fish ________ and the equilibrium quantity ________.

rises; increases

Determinants of demand

tastes income other goods and prices (substitutes and compliments) expectations about future prices number of buyers

25) The quantity supplied of a good is

the amount that the producers are planning to sell at a particular price during a given time period.

46) After the sugar substitute saccharin was found to cause cancer in laboratory mice, its price dropped dramatically. This change in the price was because

the demand for saccharin decreased.

4. The opportunity cost of something you decide to get is

the highest valued alternative you give up to get it

11. Opportunity cost is best defined as

the highest-valued alternative that is forgone when choosing among various alternatives.

Market demand

the horizontal summation of individual demand curves

27) Each point on a supply curve represents

the lowest price for which a supplier can profitably sell another unit.

8. The production possibilities frontier represents

the maximum levels of production that can be attained.

14) The "law of demand" states that, other thing remaining the same, the higher

the price of a good, the smaller is the quantity demanded.

33) A bakery can produce either cakes or cookies. If the price of cookies rises, then

the supply of cake decreases

37) Suppose the equilibrium price for soft drinks is $1.00. If the current price in the soft drink market is $1.25 each,

there will be a surplus of soft drinks.

6. On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is

working out at the gym.