Intro to Economics; Test 1- ch. 1,2,3 Answers

All economic theories are true. a. True b. False

False

Spontaneous order is coordinated by the government. a. True b. False

False

The production possibility frontier is always a straight line. a. True b. False

False

The production possibility frontier shows the relationship between three goods. a. True b. False

False

Which of the following is true of a change in quantity supplied? a. A change in quantity supplied is a movement along the supply curve. b. A change in quantity supplied is the movement or shift in the supply curve. c. A change in quantity supplied only happens in the long run. d. A change in quantity supplied is caused by a change in quality.

a. A change in quantity supplied is a movement along the supply curve.

If a good's demand is price-inelastic, then which of the following is true? a. An increase in price will cause quantity demanded to decrease by less than the percentage change in price. b. A given percentage increase in price will cause demand to decrease by a greater percentage. c. An increase in price will cause other firms to market the good. d. An increase in price will cause demand to increase.

a. An increase in price will cause quantity demanded to decrease by less than the percentage change in price.

An inferior good is defined as which of the following? a. An inferior good is a good for which demand increases and consumer income decreases. b. An inferior good is a good for which demand increases as consumer income increases. c. An inferior good is a good for which demand is based on quality. d. An inferior good is a good for which demand is based solely on price.

a. An inferior good is a good for which demand increases and consumer income decreases.

When deciding what to tax, which of the following is true of the government if it wishes to know who will be paying the tax? a. It must know the price elasticities of demand and supply. b. It must know the demand of the good or service. c. It must know the income elasticity of demand. d. It must understand the supply of the good.

a. It must know the price elasticities of demand and supply.

Which of the following is not one of the factors of production? a. Money b. Natural resources c. Capital d. Labor

a. Money

The production possibility frontier diagram contains all of the following concepts except which of the following? a. Normative points b. Opportunity costs c. Efficiency in production d. Choice

a. Normative points

What does the term revenue mean? a. Price times quantity sold b. Price times quantity supplied c. Price times anticipated quantity sold d. Price times elasticity

a. Price times quantity sold

What does the term elasticity mean? a. Responsiveness b. Responsiveness to change in demand c. Responsiveness to a change in quantity demanded d. Responsiveness to a change in price

a. Responsiveness

If a given tax is applied to a good, then the good's price will increase if which of the following is true? a. The good has an inelastic demand b. Consumers have more time to adjust to the tax hike c. The good has many substitutes d. The good has an elastic demand

a. The good has an inelastic demand

Which of the following is used to compute price elasticity of demand? ? a. The percentage change in quantity divided by the percentage change in price b. The change in quantity divided by the change in price c. The percentage change in price divided by the percentage change in quantity d. The average change in quantity divided by the change in price

a. The percentage change in quantity divided by the percentage change in price

How can the slope of the supply curve be explained? a. The supply curve's slope can be explained as a producer's response to market conditions. b. The supply curve's slope can be explained by a change in income of consumers. c. The supply curve's slope can be explained by the law of demand. d. The supply curve's slope can be explained by a change in quantity demanded.

a. The supply curve's slope can be explained as a producer's response to market conditions.

A model can be used to show an economic principle. a. True b. False

a. True

Efficiency in production means producing in which of the following ways? a. You must decrease production of one good to increase production of the other good. b. You can still increase production of both goods. c. You cannot increase production of either good. d. You can increase production of one good while maintaining the output of the other good.

a. You must decrease production of one good to increase production of the other good.

Economic resources include _____. a. capital and labor b. money and labor c. money and capital d. labor and investment

a. capital and labor

In economics, capital includes _____. a. equipment b. stocks and bonds c. all of the above d. money

a. equipment

Rent control is an example of a _____. a. price ceiling b. change in demand c. change in supply d. price floor

a. price ceiling

What is a demand curve? a. A graphical representation of the relationship between price and quality of the good demanded b. A graphical representation of the relationship between price of the good and the quantity demanded c. An undefined curved line d. A demand curve is upward sloping.

b. A graphical representation of the relationship between price of the good and the quantity demanded

The law of demand is based upon which of the following? a. A relationship between price and quality b. A relationship between price and quantity c. A relationship between price and income d. A relationship between quantity and quality

b. A relationship between price and quantity

A good has a horizontal demand curve. The government imposes a tax on the good. What would we expect? a. A share of the tax to be paid by the producers of the good and the remainder to be paid by the consumers b. All of the tax to be paid by the producers of the good c. No tax to be collected d. All of the tax to be paid by the purchasers of the good

b. All of the tax to be paid by the producers of the good

A market is which of the following? a. An illegal association of people b. Any arrangement people have for trading c. Never used in economics d. Defined by government

b. Any arrangement people have for trading

The government enacts a law to tax the production of good A. If the demand for that good is inelastic, who will pay the bulk of the enacted tax? a. Buyer and seller pay equal amounts b. Buyer c. More information is needed to answer the question. d. Seller

b. Buyer

With inelastic demand, what does prohibition do? a. Does not change total expenditures on the product b. Increases total expenditures on the banned product c. Decreases the cost of evading the prohibition d. Decreases total expenditures on the banned product

b. Increases total expenditures on the banned product

How can the demand curve shift? a. The demand curve shifts with a change in seasons. b. The demand curve shifts with a change in preferences. c. The demand curve shifts with an increase in price level. d. The demand curve shifts with a decrease in price level.

b. The demand curve shifts with a change in preferences.

What is a change in supply? a. A change in supply is caused by a change in price. b. The movement or shift in the supply curve c. A change in supply is related to the relationship of price to quality. d. A negatively sloped curve

b. The movement or shift in the supply curve

In economics, hierarchy refers to a coordination of _____. a. production b. individual human actions c. government actions d. markets

b. individual human actions

The study of economics is based upon _____. a. government actions b. scarcity c. business operations d. money

b. scarcity

If the price changes from $10 to $8 and the quantity changes from 40 to 60 units, compute the price elasticity of demand. a. 3.61 b. 10 c. 1.8 d. 1.65

c. 1.8

Which of the following does not cause a change in supply? a. A change in expectations b. A change in technology c. A change in price d. A change in input prices

c. A change in price

What is the result of a shift in the demand curve to the left? a. A decrease in price and an increase in quantity b. An increase in price and an increase in quantity c. A decrease in price and a decrease in quantity d. An increase in price and a decrease in quantity

c. A decrease in price and a decrease in quantity

What is the supply curve? a. A representation of the relationship between quantity and preferences b. A representation of the relationship between price and income. c. A representation of the relationship between price and quantity of the goods a seller will supply d. A representation of the relationship between quality and quantity of the goods the seller is willing to sell.

c. A representation of the relationship between price and quantity of the goods a seller will supply

To coordinate actions, which of the following will not work? a. Spontaneous order b. Markets c. Non-spontaneous order d. Hierarchy

c. Non-spontaneous order

If a good's demand is perfectly elastic, then which of the following is true? a. Price can decrease, and quantity demanded will decrease. b. Price can increase, but it will not affect quantity demanded. c. Price can increase, and quantity demanded will go to zero. d. Price can increase, and the quantity demanded will fall somewhat.

c. Price can increase, and quantity demanded will go to zero.

A per unit tax is levied on a good with a perfectly inelastic demand. What would we expect to see? a. Sellers paying all of the tax b. Sellers paying relatively more of the tax than buyers c. Sellers paying none of the tax d. Sellers paying relatively less of the tax than buyers

c. Sellers paying none of the tax

The theory of comparative advantage shows which of the following? a. That small countries lose when they trade with the large powerful countries b. Why trading with a country whose wages are low is unfair c. That potential gains in efficiency exist from specialization and trade d. That countries seek to exploit each others' weaknesses

c. That potential gains in efficiency exist from specialization and trade

If cheese, an ingredient in cheeseburgers, increases in price, what would we expect? a. The supply curve for cheeseburgers to shift to the right b. The demand curve for cheeseburgers to shift to the right c. The supply curve for cheeseburgers to shift to the left d. The demand curve for cheeseburgers to shift to the left

c. The supply curve for cheeseburgers to shift to the left

What does demand mean? a. The numerical utility b. Willingness to purchase goods c. The willingness and ability to purchase goods d. The ability to purchase goods

c. The willingness and ability to purchase goods

Following an increase in the supply of Good B, we see the equilibrium price and quantity of Good A decreasing. We can conclude that Good A is _____. a. a complement of Good B b. a normal good c. a substitute for Good B d. an inferior good

c. a substitute for Good B

The adjustment of the market following a change in either supply or demand is an example of ______. a. change in demand efficiency b. unemployed resources c. spontaneous order d. hierarchy

c. spontaneous order

Which of the following is true of the movement along a demand curve? a. A movement along a demand curve is caused by a change in technology. b. A movement along a demand curve is called a change in demand. c. A movement along a demand curve is caused by an increase in income. d. A movement along a demand curve is called a change in quantity demanded.

d. A movement along a demand curve is called a change in quantity demanded.

What is the result of a shift in the supply curve to the left? a. A decrease in price and an increase in quantity b. An increase in price and an increase in quantity c. A decrease in price and a decrease in quantity d. An increase in price and a decrease in quantity

d. An increase in price and a decrease in quantity

What is inventory? a. Stock of services b. Flow of goods c. Negative amount of product d. Stock of goods for sale

d. Stock of goods for sale

What is market equilibrium? a. The point at which supply equals demand b. The point at which quantity demanded is greater than quantity supplied c. The point at which there is a change in demand d. The point where quantity demanded equals quantity supplied within the market

d. The point where quantity demanded equals quantity supplied within the market

If the resource for producing a product is running out, what would we expect to see? a. The product will continue to be consumed. b. Production must be stopped. c. Government must find another resource. d. The price of the resource will rise.

d. The price of the resource will rise.

What is meant by the term opportunity cost? a. The cost of capital b. The purchase price of a productive asset c. A measure of the cost of natural resources d. The value of the next-best option not taken

d. The value of the next-best option not taken

A price support is an example of _____. a. a change in demand b. a price ceiling c. rent control d. a price floor

d. a price floor

Oil, gold, silver, and coal are examples of _____. a. labor b. capital c. efficient production d. natural resources

d. natural resources