Microeconomics Midterm Review

The statement that "the unemployment rate will increase as the economy moves into a recession" is an example of:

a generalization

As of 2012, the economy of Hong Kong most closely approximates:

a market economy

Which would be the best item to use for an analogy to describe elastic demand?

an ace bandage for a knee injury

Money is not considered to be an economic resource because:

as such it is not productive

Which product is most likely to be most price elastic?

automobiles

Among competing issues, the most important concern of economics is with the

efficient use of limited productive resources to satisfy economic wants

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. In this range of prices, demand for this product is:

elastic

The individual who brings together economic resources and assumes the risk in a capitalist economy is called the:

entreprenuer

Consider a society that is producing inside its production possibilities frontier. This society could best achieve efficiency in its production of output by:

fully employing all available resources

Which is assumed to be most limited in scope under a market system?

government

A binding price floor means that:

government is imposing a minimum legal price that is typically above the equilibrium price

Society wants to use its scarce resources efficiently. To achieve this economic goal it must:

have full employment and full production

The circular flow model:

illustrates the interdependence of businesses and consumers

To economists, the main differences between "the short run" and "the long run" are that:

in the long run all resources are variable, while in the short run at least one resource is fixed.

"In the corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms demand and supply being used correctly?

in the second statement

A demand curve:

indicates the quantity demanded at each price in a series of prices.

As a consequence of the condition of scarcity

individuals and communities have to make choices from among alternatives

The idea that the desires of resource suppliers and producers to further their own self-interest will automatically further the public interest is known as:

the invisible hand

Henry wants to buy a book. The economic perspective suggests that Henry will buy the book if:

the marginal benefit of the book is greater than its marginal cost

When an economist says that there is "too much of a good thing," the economist is suggesting that:

the marginal benefit of the thing is less than the marginal cost

In presenting the model of a demand curve, economists presume the most important variable in determining the quantity demanded is:

the price of the product itself

In constructing a stable demand curve for product X:

the prices of other goods are assumed constant

Block's sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs causes price to rise to $9 and Block's only manages to sell 460 bottles of perfume. The price elasticity of demand is:

0.33 and inelastic (The change in quantity is (500 - 460)/(500 + 460) = 0.0417 and the change in price is (7 - 9)/(7 + 9) = 0.125. Elasticity, then is 0.0417/0.125 = 0.33.)

A durable consumer good is expected to last for at least how long?

3 years

If a consumer has an income of $200, the price of X is $5, and the price of Y is $10, the maximum quantity of X the consumer is able to purchase is:

40 ($200/$5=40)

The "invisible hand" concept to describe the guiding function of prices was developed by:

Adam Smith

Economic efficiency would be primarily discussed with respect to which of the fundamental questions about a competitive market economy?

How will the goods and services be produced?

Which fundamental question about a competitive market system primarily focuses on technological progress and capital accumulation?

How will the system promote progress?

Which of the following statements is correct?

If supply increases and demand decreases, equilibrium price will fall

Which statement is correct?

In a market system, prices serve to ration goods and services to consumers

Which question is an illustration of a microeconomic question?

Is the quantity of wine purchased in one year dependent upon the price of wine?

What is the economic meaning of the expression that "there is no such thing as a free lunch"?

It means there is an opportunity cost when resources are used to provide "free" products

A reduction in the level of unemployment would have which effect with respect to the nation's production possibilities curve?

It would not shift the curve; it would be represented by moving from a point inside the curve toward the curve.

Other things equal, which of the following might shift the demand curve for gasoline to the left?

The development of a low-cost electric automobile

Which condition will encourage competition?

The freedom of sellers and buyers to enter or exit an industry

Which statement best describes a capitalist economy?

The production and allocation of goods and services is determined primarily through markets

Assuming pizza and hamburgers are substitutes, when the price of pizza increases, what must always happen?

Total revenue received by hamburger sellers increases.

Consumer sovereignty and "dollar votes" are most related to which fundamental question about a competitive market system?

What goods and services will be produced?

Issues of the distribution of goods and services and incomes in a competitive market system are the primary topic of which fundamental question?

Who will get the goods and services?

In the past few years the demand for donuts has greatly increased. This increase in demand might best be explained by:

a change in buyer tastes

The economy of Cuba most closely approximates:

a command economy

Which of the following would not shift the demand curve for beef?

a reduction in the price of cattle feed

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:

bicycles are normal goods

Which would be considered a macroeconomic study? A study of the effect of:

changing government spending to increase employment

Consider a barter situation where you have pens and you want pencils. To achieve your objective there must be a(n):

coincidence of wants

If a product's price falls and the consumer buys 4 units, as they did before the price change, then the:

consumer will no longer be in equilibrium

An increase in the price of a product will reduce the amount of it purchased because:

consumers will substitute other products for the one whose price has risen

Command systems in the Soviet Union and pre-reform China failed primarily because of:

coordination and incentive problems

The process by which new products and technologies drive out existing products and techniques is known as:

creative destriction

Suppose an excise tax is imposed on product X. We would expect this tax to:

decrease the demand for complementary good Y and increase the demand for substitute product Z

Assume, in a competitive market, price is initially above the equilibrium level. We predict that price will:

decrease, quantity demanded will increase, and quantity supplied will decrease

A straight-line downward-sloping demand curve has a price elasticity of demand that:

decreases as price decreases

On a production possibilities curve, the optimal or best combination of output for any society:

depends upon the preferences of society

The process in which workers do specialized tasks to make a product is referred to as:

division of labor

The institution of private property encourages:

easy exchange of some property because a formal title or deed exists

Elasticity of supply will increase when:

it becomes easier to substitute one factor of production for another in a manufacturing process

The supply curve for cars will be more elastic the:

longer the time interval considered

The study of how a single business firm sets its prices would fall under the study of:

microeconomics

Which of the following is not considered a consumption expenditure?

purchases of houses

If a production possibilities boundary is a curve concave to the origin and not a straight line, then:

resources are not equally suited to producing alternative products

The price elasticity of demand is a measure of the:

responsiveness of quantity demanded to a change in price

When modeling consumer choice, the price ratio of the two products is the:

slope of the budget line

A leftward shift of a product supply curve might be caused by:

some firms leaving an industry

Tickets to a university football game always sell out. In this case, the:

supply of tickets is highly inelastic

Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates that:

the amount of oranges that will be available at various prices has declined

Price elasticity is always highest

the farther up the demand curve one goes under a straight-line, downsloping demand curve

Graphically, the market demand curve is:

the horizontal sum of individual demand curves

The satisfaction or pleasure one gets from consuming a good or service is called

utility

The money income of households consists of the sum of:

wages plus rents plus interest plus profits

Increasing marginal cost of production explains:

why the supply curve is upsloping