Yeet Yeet Econ 2301 Test 1 Review

A recent study at a liberal arts college concluded that demand elasticity is 0.91 for college courses. The administration is considering a tuition increase to help balance the budget. An economist might advise the school to:

-decrease tuition in order to increase revenue by boosting enrollment. -decrease tuition because demand for courses is elastic

When demand is elastic:

-price elasticity of demand is greater than one. -the percentage change in quantity demanded resulting from a price change is greater than the percentage change in price. -consumers are relatively responsive to changes in price

Which is an example of assymetric information?

A)The seller of a used car is likely to have better information about the true condition of the car than the buyer. B) The owners of companies are likely to have better information about the true condition of the business than the buyer of company stock. C) Drug companyies are likely to have better information about the side effects of drugs than the buyers of the drugs. (ALL)

In the short run, it is impossible for an expansion of output to cause an increase in:

AFC.

C

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Europe, the likely economic effect on the demand curve for beef from Europe is: a. a shift of the demand curve for beef to the right. b. a movement down along the demand curve for beef to the right. c. a shift of the demand curve for beef to the left. d. no change; only the supply curve for beef is likely to be affected.

Which of the following is an example of market failure? A. Overuse of highways that leads to traffic congestion B. Reduced levels of vaccinations which increase illness and disease C. Substantial foreclosures caused by sub-prime lending D. All of the above

All of the above

Plagiarism is unethical because A. plagiarism might result in stealing profits from the original writer B. plagiarism can decrease the value of honest students' diplomas C. plagiarism can make it more difficult for instructors to assess the quality of students' writings D. plagiarism is a type of fraud E. all of the above are reasons

All of the above are reasons

Which of the following are reasons why most owners of companies want their employees to act ethically? A. Because they care about the well-being of their customers B. To enhance productivity C. To maximize public good will toward the company D. To avoid large fines and expensive lawsuits E. All the above are reasons why.

All of the above are reasons why

D

Which of the following would not cause an increase in the demand for cheese? a. a decrease in the price of crackers, which are consumed with cheese b. an increase in the income of cheese consumers, assuming that cheese is a normal good c. an increase in the population of cheese lovers d. a technological advance that makes it cheaper to produce cheese

In a market economy how do we determine who will get the goods and services that have been produced? A. Whoever wants them B. Whoever needs them C. Whoever can afford them D. None of the above.

Whoever can afford them

The median voter result implies that

elections will usually be landslides for the same party year after year and when the preferences of most voters change substantially, winning political positions will also tend to change.

Every time an individual decides to try out new equipment, or finds better ways to manage money, he or she is exhibiting traits of: A. money management. B. entrepreneurship. C. strategic management. D. capital management.

entrepreneurship.

If the supply curve for a product is vertical, then the elasticity of supply is:

equal to zero.

Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk: A. equals $6.00. B. equals $4.00. C. equals $3.00. D. equals $2.00. E. equals zero dollars.

equals $2.00.

In order for a market's ethics to be effective, all of the following must occur, EXCEPT: A. the ethics must be clearly defined. B. there must be clear penalties for ethics violators. C. everyone must agree to take part in the market. D. there must be enough police or inspectors to find most violations. E. police or inspectors must be unbiased.

everyone must agree to take part in the market

at the equilibrium price for gasoline

everyone with the desire and he income to buy gasoline at that prices can do so. all sellers willing and able to sell gasoline at that price can do so .

The problem of scarcity: A. exists because resources are limited relative to wants. B. exists because resources are unlimited relative to wants. C. is solved by economists using abstract models. D. can be eliminated through appropriate government intervention into markets. E. does not exist in communist societies.

exists because resources are limited relative to wants.

To obtain the greatest gains from trade, a country should specialize in and ____ those goods for which it has a comparative advantage and ____ those goods for which other countries have a comparative advantage.

export, import

Economic resources are also known as: A. profits B. financial capital. C. factors of production. D. costs.

factors of production

Cost-benefit analysis can determine the optimal amount of all the following EXCEPT: A. regulations B. market inspectors C. severity of punishments D. fairness of rules E. inspections

fairness of rules

When marginal product is rising, marginal costs will:

fall

As an individual consumes more of a given good or service, the marginal utility of that good to the consumer likely:

falls

Rational voter ignorance can lead politicians to:

favor programs with immediate and clear benefits and unclear and deferred costs, fail to take all the benefits and costs of a program fully into account in deciding on which policies to favor, do a poor job of overseeing the actions of public sector bureaus.

Which of the following is an example of a progressive tax?

federal income tax

D

Which of the following will not increase the demand for iced tea? a. an increase in advertising that makes drinking iced tea more appealing b. an increase in the price of iced coffee, a substitute product c. an increase in the income of consumers (assume that iced tea is a normal good) d. a decrease in the price of iced tea e. a decrease in the price of lemons, a complement to iced tea

B

Which of the following would increase the demand for 35mm film? a. a reduction in the price of film b. a reduction in the price of 35mm film cameras c. an increase in the price of vacation packages d. a reduction in the price of digital cameras (that do not use film) e. an increase in the price of film developing

Average variable cost:

first decreases then increase as output expands

According to the Coarse Theorem, one way to deal with an externality problem when transaction costs are low is:

for the government to make certain that property rights are well-defined.

A corrective tax equal to the external cost imposed on third parties levied on polluters will:

force polluters to internalize the external cost resulting from their actions

Which of the following would most likely feature elastic demand?

fresh green beans

The marginal cost curve:

generally falls at first and then rises as output expands.

A free-rider problem arises whenever:

goods cannot be provided exclusively to those who pay for them.

A surplus will result whenever the:

government imposes a price floor above the equilibrium price.

The law of diminishing marginal utility suggests that a demand curve:

has a negative slope

A perfectly elastic supply curve is:

horizontal

a supply schedule shows

how many units producers are willing and able to sell a various prices

the supply curve shows

how the quantity produced varies with price

The long-run production period:

is a time when all inputs are variable, varies in length according to how capital goods are specialized, is likely longer for a steel manufacture than a retailer who sells watches off a cart at the local mall.

An implicit cost:

is an opportunity cost and does not require an outlay of money

A progressive tax:

is designed to take a larger percentage of higher incomes as compared to lower incomes

If the total cost of producing 10 units equals $90, and the average total cost of producing 11 units equals $8.75, then the marginal cost of the eleventh unit produced:

is less than the average total cost of producing ten units

The current supply of Rembrandt paintings

is perfectly inelastic Because Rembrandt died in 1669, the quantity of his paintings is fixed. As such, the supply of Rembrandt's paintings cannot be increased. Buyers can offer one million or one hundred million dollars, and it does not matter, only a fixed amount of Rembrandt's paintings exist. So, its supply is a vertical line, perfectly inelastic.

A market economy without any ethics would have: A. no value. B. immorally high prices and profits. C. too much illegal activity. D. only police and the courts to protect consumers. E. maximum free market freedom to achieve maximum productivity.

no value

Which of the following activities, if any, represents an external cost?

none.

Public goods are characterized

nonrivalry in consumption and nonexcludability of non payers

Ethical rules based on morals or concepts of fairness are called

normative ethics

The short-run average total cost curve eventually turns upward to form a U shape because:

of diminishing marginal productivity.

If we know someone pays all their taxes and gives money to charity, we know that

only that they pay their taxes and give money to charity

Which of the following is not an explicit cost for the owner of a local pizza parlor?

other uses for the land that the parlor sits on

Whenever a price floor is imposed above equilibrium price, it is true that:

quantity supplied will exceed the quantity demanded.

to an economist a decrease in supply means

that for any given price the producer is now willing to produce and sell less. A decrease in supply is represented by a shift leftward of the whole curve

If the elasticity of demand coefficient for a good is one-sixth (in absolute terms), we know:

that for every 1% increase in quantity, there will be a 6% decrease in price.

The marginal cost of a good is:

the addition to the total cost from producing one more unit of output.

If a company offers a medical and dental care plan that offers benefits to all of the members of each employee's family for a given monthly premium, an employee who is a mother of five children and who has bad teeth who elects that plan would be an illustration of:

the adverse selection problem

Graphically, consumer surplus is measured by:

the area below the demand curve, but above the market price

Graphically, consumer surplus is measured by:

the area below the demand curve, but above the market price.

You operate a factory that produces beach towels. Your current level of output equals 2,000 towels per week. Your weekly variable cost equals $8,000. If your total cost each week equals $9,000, it follows that:

the average total cost of production equals $4.50 per towel.

Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is: A. nothing because he enjoys playing basketball more than studying. B. the benefit to his grades from studying for an hour. C. the increase in skill he obtains from playing basketball for that hour. D. nothing because he had a free pass into the sports complex to play basketball.

the benefit to his grades from studying for an hour.

The marginal product of labor can be defined as:

the change in total output divided by the change in labor, other factors of production held constant.

Individual citizens are unlikely to spend time and effort resisting actions of special interest groups because

the costs of such actions are spread over a large number of taxpayers

assume that coffee and tea are substitutes for each other. if weather conditions cause a substantial portion of the available coffee crop to be destroyed then most probably

the demand for tea will increase

if the price of tennis rackets were to increase we

the demand for tennis balls to decrease

Consumer surplus is:

the difference between what consumers are willing to pay and what they are required to pay for a good.

Market failure occurs when: A. the stock markets tumble due to heavy selling. B. the economy fails to allocate resources efficiently on its own. C. demand shows signs of slowing down. D. a country cannot produce a good or service at a lower opportunity cost than others.

the economy fails to allocate resources efficiently on its own.

The Book Nook reduces prices by 20%. If the dollar value of The Book Nook's sales remain constant, it indicates that:

the quantity of books sold increases by 20%.

Assume a price floor is imposed at the current equilibrium price in the market for lettuce. If the demand for lettuce then increases

the quantity of lettuce supplied will increase.

Assume a price floor is imposed at the current equilibrium price in the market for lettuce. If the demand for lettuce then increases:

the quantity of lettuce supplied will increase.

a shortage currently exists in the market for strawberries. which of the following statements is correct?

the quantity of strawberries demanded exceeds the quantity supplied and the market price is below the equilibrium price

The production function describes:

the relationship between the quantity of inputs utilized and the quantity of output produced

ceteris paribus if the vacancy rate in an apartment complex increased from 5% to 20% over the past two years we would except to see

the rent decrease leading to an increase in quantity demanded

In consumer equillibrium

total utility cannot be increased by reallocation spending among the goods consumed

The production of a good creates large spillover benefits on others, the government might correct for the:

under allocation of resources to its production by subsidizing it.

D

Which of the following would not cause a change in the demand for cheese? a. an increase in the price of crackers, which are consumed with cheese b. an increase in the income of cheese consumers c. an increase in the population of cheese lovers d. an increase in the price of cheese e. a decrease in the price of crackers, which are consumed with cheese

the law of demand refers to the

inverse relationship between the price of a good and the quantity demanded.

The benefits received principle would not work well in which of the following cases:

national defense

Which of the following is an example of a public good?

national defense

Which of the following statements is most consistent with the rule of rational choice? A. "The Environmental Protection Agency should strive to eliminate virtually all air and water pollution." B. "When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects." C. "Police forces should be enlarged until virtually all crime is eliminated." D. "Manufacturers of automobiles should seek to make cars safer, no matter the costs involved."

"When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."

If Randy's fixed cost totals $800 with variable cost per unit of $10 at a quantity of 100 units, what would his average total cost equal?

$18.00

A firm's total fixed cost equals $2,500. The firm's average fixed cost at 1,5, and 10 units of output, respectively, will be:

$2,500, $12,500, and $25,000.

Fantastic Cuts Hair Salon knows that a 15% increase in the price of their haircuts will result in a 5% decrease in the number of haircuts sold. What is the elasticity of demand facing Fantastic Cuts?

.33

Which of the following is correct? A. "Theory" and "hypothesis" are interchangeable terms meaning the same thing. B. A hypothesis may result from a tested and confirmed theory. C. A theory may result from a tested and confirmed hypothesis. D. A hypothesis is a theory whose formulation relies on mathematics.

A theory may result from a tested and confirmed hypothesis.

The total utility from consuming five donuts is 30, 54, 74, 92, and 108 utils, respectively. The marginal utility of the fourth donut is:

18

If the elasticity of supply of a good was 2, how much would the price have to increase to lead to an increase in output of 6 percent?

3 percent.

Bailey's Barber Shop knows that a 5% increase in the price of their haircuts results in a 15% decrease in the number of haircuts purchased. What is the elasticity of demand facing Bailey's Barber Shop?

3.0 If percentage change in quantity is 15% and percentage change in price is 5%, price elasticity of demand is 3.00, meaning that a 1% increase in price causes a 3% fall in the number of haircuts at Bailey's Barber Shop. Percentage change in quantity demanded %ΔQd = 15% Percentage change in price %ΔP = 5% Price elasticity of demand Ed = %ΔQd / %ΔP = 15% / 5% = 3.0 The price elasticity of demand Ed is defined as percentage change in quantity demanded divided by percentage change in price (expressed as an absolute value, with no sign). So, Ed is a number that can take several values. If that number is greater than 1, then the demand is elastic, implying that percentage change in quantity is greater than the percentage change in price, or that the quantity demanded is very responsive to changes in price.

A

A change in which of the following variables does not cause a change in demand? a. prices of unrelated goods b. incomes of demanders c. the number of demanders d. tastes of demanders e. expectations of demanders

A

A demand curve shows the relationship between price and quantity demanded, "other things remaining constant." The other things that remain constant include all of the following except the: a. price of the product. b. price of complementary products. c. price of substitute products. d. number of consumers in the demographic group purchasing the product. e. preferences of consumers.

C

A demand curve slopes: a. down and to the left. b. down and then up again in a u-shape. c. down and to the right. d. up and to the right.

D

A downward-sloping demand curve shows: a. the direct relationship between price and quantity supplied; as price increases, the quantity supplied increases. b. the inverse relationship between price and quantity supplied; as price increases, the quantity supplied decreases. c. the direct relationship between price and quantity demanded; as price increases, the quantity demanded increases. d. the inverse relationship between price and quantity demanded; as price increases, the quantity demanded decreases. e. how supply varies with demand.

An example of a capital resource is: A. stock in a computer software company. B. the funds in a CD account at a bank. C. a bond issued by a company selling electric generators. D. a dump truck. E. an employee of a moving company.

A dump truck

Which of the following policies would be most effective in promoting monthly water conservation? A. A $100 flat fee for any household that uses over 1500 gallons B. A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons C. A $125 fee for all households in addition to a $0.50 per gallon fee for all consumption D. A $200 fee for all households with zero charge per gallon of consumption E. A $50 fee for all households with zero charge per gallon of consumption

A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons

Which of the following is not true of adverse selection?

A) It can result when both parties to a transaction have little information about the quality of the goods involved. B) It can cause the quality of goods traded to fall, if quality detection costs are high. C) It can be a difficult problem to overcome, because it is not individually rational for the transactor with the superior information to provide a truthful and complete disclosure. (ALL)

C

Assume the demand schedule for cookies is downward sloping. If the price of cookies falls from $2.50 to $2.25 per dozen: a. the demand for cookies will fall. b. the demand for cookies will rise. c. a larger quantity of cookies will be demanded. d. a smaller quantity of cookies will be demanded.

Which of the following is true? A. By putting unemployed resources to work or by putting already employed resources to better uses, we could expand output in an economy. B. To generate increased economic growth, a society would produce fewer consumer goods and more capital goods in the present. C. If the production possibility curve is concave from below (that is, bowed outward from the origin), it reflects increasing opportunity costs of producing additional amounts of a good. D. Increases in a society's output do not make scarcity disappear. E. All of the above are true.

All of the above are true.

Ethics violators like embezzlers, frauds, tax cheats and bank robbers A. usually follow most rules and other ethics most of the time. B. not only injure individuals and companies, but also often hurt entire markets. C. often use rational cost-benefit analysis when deciding whether to cheat. D. may feel so ashamed and guilty of their crimes that they are driven to suicide. E. All of the above may be true of ethics violators.

All of the above may be true of ethics violators.

Which of the following would reflect self-interested behavior? A. A worker pursuing a higher paying job and better working conditions. B. A consumer seeking a higher level of satisfaction with her current income. C. Donating a cell phone to a woman's shelter. D. Mother Theresa using her Nobel Prize money to care for the poor. E. All of the answers would reflect self-interested behavior.

All of the answers would reflect self-interested behavior.

A

All of the following would shift a product's demand curve except a(n): a. increase in the price of the product. b. decrease in consumer income. c. increase in the price of a substitute. d. increase in the price of a complement. e. change in consumer preferences.

Bill says: "The imposition of a tax on tequila will increase its price." Bob says: "Taxes should be imposed on tequila because college students drink too much." A. Both statements are normative. B. Both statements are positive. C. Bill's statement is normative, and Bob's statement is positive. D. Bill's statement is positive, and Bob's statement is normative.

Bill's statement is positive, and Bob's statement is normative.

Which of the following is true? A. An advanced market economy would tend to use both labor intensive and capital intensive production methods. B. An economy in which labor is relatively scarce would tend to use capital intensive production methods. C. An increase in the availability of labor relative to capital in an economy would tend to increase how labor intensive the production processes in that economy would be. D. All of the above are true. E.Both b. and c. are true.

Both b. and c. are true.

Which of the below is true?

Both price floors and price ceilings generally reduce the quantity exchanged in the market.

Which of the below is true?

Both price floors and price ceilings reduce the quantity exchanged in the market.

For Brent, if the marginal utility of sleeping an extra hour, from 8 a.m. to 9 a.m., is negative:

Brent is better off getting up at 8 a.m.

C

Ceteris paribus, when transportation costs are high relative to selling prices, markets are __________ and __________. a. numerous; global in scope b. few; global in scope c. numerous; geographically limited d. few; geographically limited

Which of the following would break a positive ethic? A. Having lustful daydreams about your best friend's girlfriend (or boyfriend) B. Driving two miles per hour over the speed limit C. Cursing your instructor when you're alone at home at 3 AM answering these stupid questions D. Spending the day sleeping & watching TV instead of studying for your classes E. None of the above

Driving two miles per hour over the speed limit

The government proposes a tax on flowers in order to boost its revenue. Consumers will bear all of this tax if the:

Either a. or b. is true.

Opportunity cost includes A. monetary costs only. B. non-monetary costs only. C. both monetary and non-monetary costs. D. neither monetary nor non-monetary costs.

both monetary and non-monetary costs

Which of the following best illustrates the fallacy of composition? A. If Mr. Smith had more money, he could buy more scarce goods; if the Adams family had more money, it could buy additional goods. B. If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods. C. If other variables are not held constant, economists may not observe the relationship between price and quantity demanded that is expected. D. Aggregate consumption may not behave in the same manner as the consumption of a particular individual.

If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods.

C

If consumers are less willing and able to pay for each level of output than they were previously, then apparently: a. demand has increased. b. supply has increased. c. demand has decreased. d. there has been a movement down along the demand curve. e. there has been a movement up along the demand curve.

If average variable cost exceeds marginal cost, then:

both the average variable and average total cost are decreasing

D

If the demand for milk is downward sloping, then an increase in the price of milk will result in a(n): a. increase in the demand for milk. b. decrease in the demand for milk. c. increase in the quantity of milk demanded. d. decrease in the quantity of milk demanded. e. decrease in the supply of milk.

B

If the price of tennis rackets were to increase, we would expect: a. the demand for tennis balls to increase. b. the demand for tennis balls to decrease. c. the supply of tennis balls to increase, leading to a movement along the demand curve for tennis balls. d. the supply of tennis balls to decrease. e. both b. and d. to occur.

The marginal benefit to you of drinking bottled iced tea is $1.50. The price of a bottle of iced tea is $1.25. A. If you purchase iced tea you will suffer a net loss of 25 cents per bottle. B. If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents. C. You will not purchase iced tea if you are acting rationally. D. If you are acting rationally, you will purchase iced tea until the marginal benefit falls to 25 cents.

If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents.

B

In economics, the demand for a good refers to the amount of the good people: a. would like to have if the good were free. b. will buy at various prices. c. need to achieve a minimum standard of living. d. will buy at alternative income levels.

Which of the following is true with regard to production possibilities curves? A. Underutilized resources or those not being put to their best uses are illustrated by output combinations along the production possibilities curve. B. Economic growth means a movement along an economy's production possibilities curve in the direction of producing more consumer goods. C. Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future. D. From a point inside the production possibilities curve, in order to get more of one thing, an economy must give up something else.

Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future.

If the marginal benefit Isaac derives from the consumption of another candy bar is greater than the price of the candy bar, then:

Isaac will increase his total satisfaction by purchasing the candy bar.

Kelly, who grows geraniums to sell, is currently producing a level of output at which her marginal cost equals her average variable cost. What must be true about Kelly's average variable cost at this level of output?

It is a minimum

Which of the following is true?

It is possible to eliminate a shortage by raising a price ceiling sufficiently.

Rebecca consumes both iced tea and coffee. Iced tea is priced at $1.50 per bottle and coffee at $2.oo per 16-ounce cup. Which of the following marginal utility pairs is consistent with Rebecca's consumer equilibrium at these prices?

MU of iced tea=3; MU of coffee =4

Consumer equilibrium is reached when a budget is used to buy two goods, x an dy, and

MUx=PUy/Py and all of the budget is spent.

Which of the following best explains the source of consumer surplus for Good A?

Many consumers would be willing to pay more than the market price for some units of Good A.

Which of the following must be true if the short-run average total cost curve is declining?

Marginal cost is less than average total cost.

As quantity increases, which of the following must be true if average total costs are rising?

Marginal cost must be greater than average total cost.

Which of the following serve as the language of the market system? A. Monetary and fiscal policies B. Morals C. Market prices D. Governments

Market prices

Mike can wash a car in 5 minutes and wax a car in 15 minutes. Tony can wash a car in 10 minutes and wax a car in 20 minutes. Which of the following is true? Mike can wash a car faster and has comparative advantage in washing cars. a.) Mike can wash a car faster and has comparative advantage in washing cars. b.) Mike can wax a car faster and has comparative advantage in waxing cars. c.) Tony can wash a car faster and has comparative advantage in washing cars. d.) Tony can wax a car faster and has comparative advantage in waxing cars. e.) Both a. and b. are true.

Mike can wash a car faster and has comparative advantage in washing cars.

Which of the following is true? A. In the product markets, firms are buyers and households are sellers. B. In the factor markets, firms are sellers and households are buyers. C. Firms receive money payments from households for labor, land, capital, and entrepreneurship. D. All of the above are true. E. None of the above is true.

None of the above is true.

Assume there is a price ceiling imposed on a good which is below the equilibrium price. Which of the following changes would reduce the size of the surplus?

None of the above; there is no surplus.

Which of the following is true? A. Poverty could be eliminated but scarcity could not. B. Scarcity could be eliminated but poverty could not. C. Both scarcity and poverty could be eliminated. D. Neither scarcity nor poverty could be eliminated.

Poverty could be eliminated but scarcity could not.

Which of the following statements best summarized the essence of public choice analysis?

Public choice analysis applies economic principles to political science issues.

Which of the following are attempts by the government to correct the problem of asymmetric information in the market place?

Publicly traded companies are required to disclose certain information to the public and to be audited annually. B) Information about the side-effects of drugs are required to be included with medications. C) Truth in lending laws required lenders to include written disclosures about interest rates, fines, and other terms of a loan.

Which of these conditions are most likely to motivate honest people to become corrupt? A. Reading that Bernie Madoff was sentenced to life in prison after stealing billions of dollars B. Having your boyfriend (or girlfriend) elope with someone who is rich C. Seeing a film of Bonnie and Clyde being shot by machine guns D. Seeing your boss and fellow workers get rich by lying and cheating E. None of the above; if you're an honest person, you'll stay that way

Seeing your boss and fellow workers get rich by lying and cheating

From an economists' perspective, which of the following observations is not true? a.) Self-interest is purely monetary in nature. b.) Self-interest can include benevolence. c.) Self-interest is a good predictor of human behavior in most situations. d.) Self-interest is not the same as selfishness.

Self-interest is purely monetary in nature.

Taxes on goods with ____ demand curves will tend to raise more tax revenue for the government than taxes on goods with ____ demand curves.

inelastic; elastic

Minimum wage laws have little or no effect in this segment.

Skilled workers

Which of the following accounted for the highest percentage of federal government spending in 2012?

Social Security and National Defense equally

Which of the following people are more likely to break ethical rules:

Someone who is ignorant

If Stephanie buys a laptop for $700 and the maximum she would have paid was $1,000, which of the following is true?

Stephanie received a consumer surplus of $300.

Which of the following is NOT an example of the use of the problem solving perspective provided by economics? A. An investor considers the tax consequences of selling stocks in order to buy bonds (which she believes offer a better return). B. A rancher recognizes that raising more cattle this year will damage his pasture and limit next year's herd size. C. The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember. D. An economics student considers the scarcity of available study time for studying the other subjects that she should be studying before deciding to study economics this evening.

The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember.

Which of the following statements is TRUE? A. The U.S. government specifies all business ethics adopted by American corporations. B. Ethics decisions are for philosophers, churches and individuals, not government. C. The U.S. government insists that foreign trading partners adopt systems of business ethics identical to ours. D. The U.S. government defines and enforces business ethics in order to protect the economy. E. The U.S. government does not define or enforce any ethical rules.

The U.S. government defines and enforces business ethics in order to protect the economy.

Which of the following is the most important determinant of the elasticity of supply?

The amount of time producers have to adjust their behavior in response to a price change.

Which of the following is most likely to be a fixed cost for a business?

interest payments on a loan used to finance the construction of a building

A

The demand curve for a typical good has a(n): a. negative slope because some consumers switch to other goods as the price rises. b. negative slope because consumer incomes fall as the price of the good rises. c. negative slope because the good has less "snob appeal" as its price falls. d. inverse slope because as the price goes up, the good has more profitability. e. positive slope because price is a clear indicator of need.

C

The demand schedule for a good: a. indicates the quantity that people will buy at the prevailing price. b. indicates the quantities that suppliers will sell at various market prices. c. indicates the quantities that will be purchased at alternative market prices. d. is determined primarily by the cost of producing the good.

Which of the following is a statement of positive economics? A. The income tax reduces after-tax incomes of the rich. B. A reduction in tax rates makes the after-tax distribution of income fairer. C. Tax rates ought to be reduced so that people will work more. D. All of the above are statements of positive economics. E. None of the above is statements of positive economics.

The income tax reduces after-tax incomes of the rich

Which of the following activities, if any, represents an external benefit?

The increase in the value of property belonging to your neighbors when you hire a landscaper to beautify your front yard.

D

The law of demand asserts that: a. output prices are more important than input prices. b. when people want a good badly enough they will find a way to pay for it. c. people want to buy more of goods that are priced very high because of their prestige. d. the quantity of a good that people will buy is inversely related to the product's price.

B

The law of demand indicates that as the price of a good increases: a. suppliers wish to sell less of it. b. buyers desire to purchase less of it. c. more of it is produced. d. more of it is desired.

C

The law of demand refers to the: a. decrease in price that results as more units of a product are demanded. b. increase in price that results from an increase in demand for a good of limited supply. c. inverse relationship between the price of a good and the quantity demanded. d. increase in the quantity of a good made available when its price increases.

C

The law of demand refers to the: a. negative relationship between the price of a good and the willingness of producers to sell it. b. price increase that results from an increase in demand. c. inverse relationship between the price of a good and the quantity demanded. d. increase in the quantity of a good made available when its price increases.

Which of the following violates the law of diminishing marginal utility?

The more beer phil drinks, the more he enjoys the next one.

Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes? A. He has already made all the clothes he will need for a few years. B. The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career. C. Sergei just can't find the material he likes in the United States. D. Sergei has a comparative advantage in tailoring clothes. E. The opportunity cost of making clothes instead of playing hockey is relatively low, so he should instead concentrate on his hockey career (for which the opportunity cost is very high).

The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.

Which of the following is false?

The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. If demand is elastic, it means the quantity demanded changes by a relatively larger amount than the price change. If demand is inelastic, it means the quantity demanded changes by a relatively smaller amount than the price change. All of the above are true.

E

The quantity of a good demanded tends to increase as its price falls because: a. a decrease in price shifts the demand curve to the right. b. a decrease in price shifts the demand curve to the left. c. a decrease in price shifts the supply curve to the right. d. at lower prices, suppliers are willing to supply a greater quantity to the market. e. a decrease in price leads consumers to substitute toward this now relatively cheaper product.

Which of the following represents a normative statement? A. A decrease in price leads to an increase in quantity demanded. B. The temperature outside is 90 degrees. C. The study of economics is more important than the study of history. D. People will buy less butter at $1.50 per pound then they will at $1.00 per pound. E. Normally, as an economy develops, the nation's birth rate tends to fall.

The study of economics is more important than the study of history.

Which of the following is true of perfectly elastic supply?

The supply price remains constant.

Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy? A. Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments. B. Their positive statements help us understand the good results of a policy change, and their normative statements help us understand the negative results. C. We really do not have to worry about them since trained economists never make normative statements. D. Economists are always making assumptions, and policy should not be based on assumptions. E. Economists are "tricky" by nature, so we need to be able to distinguish truth from political rhetoric.

Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments.

Which of the following is true of resources? A. Their availability is unlimited. B. They are the inputs used to produce goods and services. C. Increasing the amount of resources available could eliminate scarcity. D. They are inputs used to produce goods and services and increasing the amount of resources available could eliminate scarcity.

They are the inputs used to produce goods and services.

"As a rational person, you would expect individuals to always avoid actions that are illegal." T or F A. This is a true statement because most people don't want to suffer the penalties associated with criminal behavior. B. This is a true statement because most individuals are good citizens and prefer not to commit crimes. C. This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway. D. This is a false statement because only people with certain genetic predispositions are likely to commit crimes.

This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway.

Tom is a castaway who washes up on a remote island. He can catch eight birds per day or catch ten fish per day. The natives on the island can catch ten birds per day or catch twenty fish per day. According to comparative advantage, A. Tom should catch more birds and fish less, then trade birds for fish. B. Tom should catch fewer birds and fish more, then trade fish for birds. C. Both should catch more birds and fish less. D. Both should catch fewer birds and fish more.

Tom should catch more birds and fish less, then trade birds for fish.

Which of the following is most likely an example of correlation but not an example of causation? A. In the U.S., more pizza is consumed on Super Bowl Sunday than any other day of the year. B. The cost of advertising during the first half of the Super Bowl is greater than the cost of advertising in the second half. C. Usually, if I eat a chili dog and drink a beer before a game, my teams wins. D. Generally speaking winning football teams tend to average more rushing yards than losing football teams.

Usually, if I eat a chili dog and drink a beer before a game, my teams wins.

What is true about utility?

Utility varies from individual, total utility is the total amount of satisfaction derived from the consumption of a certain number of unites of a good or a service, marginal utility tends to decline, the more of a good or service is consumed, when marginal utility is at its maximum, total utility is zero.

What according to an economist, forms the basis of rational human behavior under current and anticipated future circumstances? A. Scarcity and rarity B. Opportunities and pay-offs C. Values and information D. Legal consequences

Values and information

Which of the following is a resource exchanged in the factor markets? A. land B. capital C. labor D. entrepreneurship E. all of the above are traded in the factor markets.

all of the above are traded in the factor markets.

Which of the following does not specify positive ethical rules? A. Webster's Dictionary B. Robert's Rules of Order C. Hoyle's Rules of Games D. The San Marcos Land Development Code E. The Amy Vanderbilt Complete Book of Etiquette

Webster's Dictionary

E

When a demand schedule is drawn in a graph: a. price is measured on the vertical axis. b. quantity is measured on the horizontal axis. c. the resulting curve has a negative slope. d. other variables are held constant. e. all of the above are correct.

D

When quantity demanded decreases in response to a change in price: a. the demand curve shifts to the right. b. the demand curve shifts to the left. c. there is a movement down along the demand curve. d. there is a movement up along the demand curve. e. the supply curve shifts to the right.

B

When the price of a good falls relative to other goods and the consumer consequently buys more of this good, it is called the: a. income effect. b. substitution effect. c. complement effect. d. net effect. e. demand effect.

Which of the following are NOT very important to maintaining effective market ethics? A. A willingness by the vast majority of market participants to obey the ethics and report violators B. The number of inspectors or police C. The severity of punishments for cheating D. Whether people understand the reasons for the rules or regulations E. Whether the likely penalties for cheating are greater than the rewards

Whether people understand the reasons for the rules or regulations

C

Which of the following explains why the quantity of a good demanded decreases when its price increases? a. Consumer preferences change when the price of a good changes. b. The nominal income of consumers falls when the price of a good increases. c. Substitutes become relatively cheaper when the price of a good increases. d. Complements become relatively cheaper when the price of a good increases. e. None of the above provides a reasonable explanation.

A

Which of the following groups are likely to determine the demand side of the market? a. Firms that buy inputs b. Firms that produce and sell goods c. Resource owners who sell their inputs d. Workers in a firm

B

Which of the following is true of a competitive market? a. The rules of supply and demand do not apply to it. b. Buyers and sellers have little market power. c. Each buyer's or seller's effect on market price is substantial. d. Few sellers offer similar products.

Scarlett recently began running her husband's lumber mill. Last month she took in $5,000 sales revenue and paid $3,400 in out-of-pocket costs. Did the lumberyard make an economic profit last month?

Without knowing the magnitude of implicit costs, it it not possible to state whether the lumberyard earned an economic profit last month.

The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000. A. If you are acting rationally, you will borrow $2,000 and purchase a new sport utility vehicle. B. You will not purchase the new sport utility vehicle at this time if you are acting rationally. C. If you do not purchase the new sport utility vehicle, your net loss will be $2,000. D. If you are acting rationally, you will purchase sport utility vehicles until the marginal cost of doing so falls to $20,000.

You will not purchase the new sport utility vehicle at this time if you are acting rationally.

A change in which of the following variables does not cause a change in demand? A. prices of unrelated goods B. incomes of demanders C. the number of demanders D. tastes of demanders E. expectations of demanders

a

The difference between a change in quantity supplied and a change in supply is that a change in: A. quantity supplied is caused by a change in a good's own, current price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes. B. supply is caused by a change in a good's own, current price, while a change in the quantity supplied is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes. C. quantity supplied is a change in the amount people want to sell, while a change in supply is a change in the amount they actually sell. D. supply and a change in the quantity supplied are the same thing.

a

If the price elasticity of demand was 4.0 (in absolute terms), a 10% off sale would lead to:

a 40% increase in purchases by customers.

Effective free market ethical systems must provide for all of the following EXCEPT: A. Clearly defined rules and regulations. B. meaningful punishments for rule breakers. C. a clearly defined moral foundation. D. adequate market oversight and policing. E. enough freedom for creativity and competition.

a clearly defined moral foundation

What proportion of wage and salary income up to $106,800 goes to Social Security as of 2011?

a combined total of 10.4 percent from employees and employers

A downward sloping straight-line production possibilities curve implies: A. an inefficient use of resources. B. an efficient use of resources. C. an increasing opportunity cost. D. a constant opportunity cost.

a constant opportunity cost.

If firms were required to pay the full social costs of the production of goods, including both private and external costs, other things being equal, there would probably be:

a decrease in production

Which of the following is not likely to result from an increase in the federal minimum wage?

a decrease in teenage unemployment

which of the following would increase the quantity of LCD TVs demanded but would not increase the demand for LCD TVs

a decrease in the current price of LCD TVs

A theory can best be defined as: A. an untestable assertion or statement of untestable fact. B. a testable statement that can be definitively proven to be true or false using empirical analysis. C. a normative statement that can be tested empirically through analysis of real-world data. D. a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work.

a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work.

Which of the following goods is least likely to be provided by the private sector?

a good characterized by rivalry in consumption from which paying customers cannot be excluded

Which of the following would most likely include positive externality:

a hybrid automoblie

The completely private ownership of property and the exclusive use of the market system to direct and coordinate economic activity are most characteristic of: A. a command economy. B. a mixed economy. C. a market economy. D. a traditional economy.

a market economy.

Which of the following is an example of an unintended consequence?

a price ceiling on gasoline that causes a gas shortage

To internalize a negative externality:

a producer's cost could be increased by an amount equal to the external cost resulting from the production of a good.

Assume a price ceiling is imposed at the current equilibrium price in the market for wheat. If the supply of wheat then decreases as a result of bad weather, then:

a shortage of wheat will be created.

The imposition of a price ceiling on a market often results in:

a shortage.

Which of the following lies primarily within the realm of microeconomics? A. an empirical analysis of the relationship between the growth of the money supply and the rate of inflation B. an economic model forecasting the impact of a tax increase on consumer spending and national output C. a study of supply and demand conditions in the market for orange juice D. a model forecasting the impact of a change in interest rates on the level of investment in the economy

a study of supply and demand conditions in the market for orange juice

Assume a price floor is imposed in the wheat market at the equilibrium price and that a price ceiling is imposed in the gasoline market at the equilibrium price. An increase in supply in both the wheat and gasoline markets will create:

a surplus in the wheat market and an increase the quantity of gasoline traded.

A hypothesis is: A. a normative economic statement. B. a testable proposition. C. a statement that cannot be evaluated using real-world data. D. a model with no connection to the real world.

a testable proposition.

A price ceiling imposed below equilibrium price causes a deadweight loss for society because

as a result of the ceiling, units of output are not produced despite the fact that the value to consumers exceeds the production cost.

An economist's measurement of profit differs from an accountant's in that:

accountants do not always include all of the opportunity costs when calculating total production costs.

Diminshing marginal product of labor occurs when:

adding another unit if labor increases output, but not by as large a margin as the last unit of labor employed

A free market lacking clear ethical rules, adequate oversight and meaningful punishments for rule breakers might suffer: A. decrease in market demand. B. decrease in market supply. C. decrease in equilibrium price. D. total market collapse. E. all of the above.

all of the above

A student has a chance to see Green Day in concert. The student also has a major economics exam the next morning. If the student goes to the concert: A. she may receive a lower grade on the economics exam. B. the opportunity cost of the concert is the value of the time spent studying. C. the decision involves a trade-off. D. all of the above are correct.

all of the above are correct

Resources and goods are free to move across state lines. If Oregon producers choose to specialize in producing honey and California producers choose to specialize in growing almonds, then we could reasonable conclude that: A. California has a comparative advantage in producing almonds. B. Oregon has a comparative advantage in producing honey. C. the opportunity cost of growing almonds is lower in California than in Oregon. D. the opportunity cost of producing honey is lower in Oregon than in California. E. all of the above are true.

all of the above are true

Which of the following is true? a.) voluntary trades give both parties more in value than what they give up b.) w/o the ability to trade, ppl would not tend to specialize in those areas where they had a comparative advantage c.) ppl can gain by specializing in the production of the good in which they have a comparative advantage. d.) voluntary trade directly increases.... e.) all of the above are true

all of the above are true

Which of the following is true? a.) people specialize by concentrating their energies on the activity to which they are best suited, because they incur lower opportunity costs as a result. b.) the primary reason people pursue their comparative advantage is their self-interest c.) one advantage of specialization is that workers acquire greater skill from repetition d.) if a person, a region, or a country.... e.) all of the above

all of the above are true.

Which of the following is an example of an individual motivated be self-interest? A. a student volunteering at a soup kitchen B. an attorney providing free legal service to low income families C. a young person volunteering for the Peace Corps D. a man buying a new Camaro

all of the answers

Economics is concerned with: A. the choices people must make because resources are scarce. B. human decision makers and the factors that influence their choices. C. the allocation of limited resources to satisfy virtually unlimited desires. D. all of the answers are correct.

all of the answers are correct

Which of the following is not an example of a resource? a.) a forest b.) a river c.) a John Deere tractor d.) the chef at the city's best café e.) all of the answers are resources

all of the answers are resources

The term "ceteris paribus" means that: A. everything is variable. B. all variables except those specified are constant. C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole. E. all variables are held constant.

all variables except those specified are constant.

The real core of most economic problem is to: A. increase the amount of leisure time available to people. B. guarantee everyone on the planet a minimum level of food, shelter and clean water. C. allocate limited resources among competing uses. D. eliminate scarcity.

allocate limited resources among competing uses.

The importance of the ceteris paribus assumption is that it: A. allows one to separate normative economic issues from positive economic ones. B. allows one to generalize from the whole to the individual. C. allows one to analyze the relationship between two variables apart from the influence of other variables. D. allows one to hold all variables constant so the economy can be carefully observed in a suspended state.

allows one to analyze the relationship between two variables apart from the influence of other variables.

Average fixed cost:

always decreases as output expands.

each point on the demand curve shows the

amount that people want to buy at that price

The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6. It is expected, therefore, that a 5% increase in price would lead to:

an 8% decrease in the quantity of gourmet coffee demanded.

A subsidy in an industry would result in:

an increase in consumer surplus and an increase in producer surplus but not an increase in the gains from trade

Which of the following is most likely a topic of discussion in a microeconomics course? A. a decrease in the share of national income paid to the government in taxes B. an increase in the price of lumber used to construct houses C. an increase in the rate of inflation D. an increase in the number of jobless individuals filing unemployment claims E. the size of the national debt

an increase in the price of lumber used to construct houses

which of the following would not shift the supply curve for swordfish

an increase in the price of swordfish

which of the following would be most likely to cause a reduction in the supply of Nintendo video games

an increases in the price of computer chips used to make Nintendo games

which of the following is an example of a moral hazard?

an individual drives less cautiously after obtaining automobile insurance.

Which of the following is an example of a capital resource? A. redwood trees B. unskilled labor C. stocks and bonds D. an oil rig

an oil rig

An explicit cost:

an opportunity cost and an out-of-pocket expense

The short run is that period in which firms:

are able to vary some, but not all, inputs.

Pollution damages the environment we live in. An economist would advise that we reduce air pollution: A. as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction. B. until the total benefit from air pollution reduction just equals the total cost of pollution reduction. C. until air pollution levels reach near-zero levels. D. to the levels experienced in the 1950s when air was much cleaner near big cities.

as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.

Total welfare gains from trade to the economy can be measured:

as the sum of consumer and producer surpluses

which of the following is the correct way to describe equilibrium in a market

at equilibrium quantity demanded equals quantity supplied

If average fixed cost and average variable cost are summed together, the result is:

average total cost

The sum of AVC and AFC equals

average total cost.

A supply schedule shows: A. projected sales as ad spending varies. B. how many units producers are willing and able to sell at various prices. C. possible combinations of output as input prices vary. D. how many units consumers would like to buy at various prices.

b

Each point on the supply curve shows the: A. amount that people want to buy at that price. B. quantity supplied at that price. C. productive capacity of an individual producer. D. the amount producers want to sell to buyers of different income levels.

b

If the price of music downloads decreases, which of the following is most likely to occur? A. Quantity demanded will decrease. B. Quantity demanded will increase. C. Demand will increase. D. Demand will decrease.

b

If the price of tennis rackets were to increase, we would expect: A. the demand for tennis balls to increase. B. the demand for tennis balls to decrease. C. the supply of tennis balls to increase, leading to a movement along the demand curve for tennis balls. D. the supply of tennis balls to decrease. E. both b. and d. to occur.

b

In economics, the demand for a good refers to the amount of the good people: A. would like to have if the good were free. B. will buy at various prices. C. need to achieve a minimum standard of living. D. will buy at alternative income levels.

b

Whenever the price of Good A decreases, the demand for Good B increases. Good A and B appear to be: A. compliments. B. substitutes. C. inferior goods. D. normal goods. E. complements.

b

Which of the following is true of a competitive market? A. The rules of supply and demand do not apply to it. B. Buyers and sellers have little market power. C. Each buyer's or seller's effect on market price is substantial. D. Few sellers offer similar products.

b

Which of the following would NOT cause a change in the supply of milk? A. an increase in government subsidies to dairy farmers B. an increase in the price of milk C. the discovery of growth hormones to stimulate the milk production of cows D. an increase in the cost of feed for cows E. All of the above will cause a change in the supply of milk.

b

Assume that the elasticities of supply and demand in an industry are both equal to 2 and that it is currently untaxed. A new tax imposed on the industry will:

be borne equally by demanders and suppliers.

AN example of a positive externailty is:

beautiful trees on property along a parkway

If people are self-interested, A. they will always choose work over leisure. B. they will never choose work over leisure C. as their preferences for leisure time increase, they are likely to work less. D. as the wages they are offered increase, they are likely to work more. E. both c. and d. are true.

both c. and d. are true.

For a given, permanent reduction in demand for a product:

both c. and d. will be true.

When city beautification programs are funded privately:

both free riders and contribution citizens are likely to benefit from a more beautiful city and an under allocation of resources toward the beautification project is likely to occur relative to what is socially efficient.

Economic profits will take into account:

both implicit and explicit costs.

The opportunity cost of going to college includes: A. both tuition and the value of the student's time. B. tuition, but not the value of the student's time, which is a cash cost. C. tuition, but not the value of the student's time, which is a monetary cost. D. neither tuition nor the value of the student's time, since obtaining a college degree makes one's income higher in the future. E. neither tuition nor the value of the student's time, at least at state-supported universities and colleges.

both tuition and the value of the students time

competitive markets

buyers and sellers have little market power ex: market of specific agricultural products, wheat for example, where there are many farmers who each produce a very small fraction of the total production of wheat and many buyers who each consume a tiny portion of that production. Because no single buyer or seller can affect the price of wheat the price is taken as given. At the market place buyers can buy all they want and sellers can sell all they want.

In a market economy, the amount of a good that is produced is primarily decided by the interaction of: A. buyers and sellers. B. all consumers. C. producers and input suppliers. D. producers and government planning committees. E. all producers.

buyers and sellers.

An economic hypothesis is tested: A. by assessing the realism of its assumptions. B. by comparing the hypothesis's predictions to real-world data. C. most frequently by using a controlled experiment. D. by assessing the level of descriptive detail. E. by none of the above. Economic hypotheses are theoretical and therefore cannot be tested. Reset Selection

by comparing the hypothesis's predictions to real-world data.

Public goods are those that are consumed:

by the paying and non paying public alike.

An upward-sloping supply curve shows that: A. buyers are willing to pay more for particularly scarce products. B. suppliers expand production as the product price falls. C. suppliers are willing to increase production of their goods if they receive higher prices for them. D. buyers are willing to buy more as the product price falls. E. buyers are not affected either directly or indirectly by the sellers' costs of production.

c

The demand schedule for a good: A. indicates the quantity that people will buy at the prevailing price. B. indicates the quantities that suppliers will sell at various market prices. C. indicates the quantities that will be purchased at alternative market prices. D. is determined primarily by the cost of producing the good. E. indicates the quantity that people will buy at different times of the day or year.

c

The law of demand refers to the: A. decrease in price that results as more units of a product are demanded. B. increase in price that results from an increase in demand for a good of limited supply. C. inverse relationship between the price of a good and the quantity demanded. D. increase in the quantity of a good made available when its price increases.

c

The market supply schedule reflects the total quantity: A. supplied at market price. B. supplied by all of the producers at the equilibrium price. C. supplied at each price by all of the producers. D. the vertical summation of the supply curves for individual firms.

c

The supply curve shows: A. the same basic information as a demand curve. B. how the average cost of production varies with price. C. how the quantity produced varies with price. D. how the quantity demanded varies with price.

c

Which of the following is most likely to be an inferior good? A. Porsches. B. Lobster. C. Used clothing. D. An Ivy League education.

c

Ethics A. is a branch of philosophy. B. are moral rules or standards governing human conduct. C. are rules or standards governing human conduct, but not necessarily moral rules. D. the moral principles of an individual person. E. can be defined in any of the ways above.

can be defined in any of the ways above

The reason why national defense is commonly provided by the government, while food is not, is that food:

can easily be withheld from those who refuse to pay for it.

An individual has a comparative advantage in production if that individual: A. can produce at the highest opportunity cost. B. is more self-sufficient than others. C. can produce at the lowest opportunity cost. D. both a. and b. E. both b. and c.

can produce at the lowest opportunity cost.

The Shoe Emporium reduces the price of its shoes by 50% and finds that the quantity demanded for its shoes more than doubles. The demand for shoes from The Shoe Emporium appears to be:

elastic

Marginal thinking is best demonstrated by: A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. B. deciding to never purchase a coat made with animal skins or furs. C. acquiring the information relevant to a choice before making that choice. D. measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake. E. choosing to purchase beer until there is no additional enjoyment from the consumption of beer.

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time

Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n): A. disincentive to trade with others. B. higher opportunity cost. C. absolute advantage in production. D. comparative advantage in production. E. None of the above. People, regions, and countries should learn to be self-sufficient.

comparative advantage in production.

Marginal analysis involves: A. comparing the total benefits of all actions to the total costs incurred as a result of those actions. B. abstract thinking, which is never actually utilized by consumers when making purchasing decisions. C. holding all other variables constant when isolating the relationship between two variables. D. comparing the additional benefit from an action to the additional cost.

comparing the additional benefit from an action to the additional cost

whenever the price of Good A decreases the demand for Good B increases. Good A and B appear to be

complements

An economy's resources: A. consist of land, labor, capital, and entrepreneurial skills. B. are unlimited in a country like the United States. C. are always efficiently utilized in wealthy nations. D. consist of land, labor, and entrepreneurial skills but not capital.

consist of land, labor, capital, and entrepreneurial skills.

Suppose both goods L and M have a price of $6. To maximize your utility from spending a given amount of income on the two goods you should:

consume them so that consumption of the last unit each good provides the same marginal utility.

When a consumer allocated her limited budgetary resources to maximize her well-being, _______ is achieved

consumer equillibrium

The difference between the value of a good to consumers and its price is known as

consumer surplus

Ceteris paribus, an increase in the price of a good will cause the:

consumer surplus derived from the good to decrease.

when a good is nonrivalrous in consumption, then:

consumption by an additional individual does not prevent others from benefiting from a public good.

Tax collected based on a taxpayers spending is known as:

consumption tax

"Mandating longer sentences for any criminal's third arrest will lead to a reduction in crime. Less crime will reduce the number of police officers cities will hire." This quotation: A. contains positive statements only. B. contains normative statements only. C. contains both normative and positive statements. D. contains neither normative nor positive statements.

contains positive statements only.

Negative externalities are:

costs incurred by individuals other than buyers and sellers

If there is a surplus, ____ will be frustrated by their inability to exchange at the current price, and they will ____ the prices as a result. A. buyers; raise. B. buyers; lower. C. sellers; raise. D. sellers; lower.

d

Which of the following would not shift the supply curve for swordfish? A. a reduction in the number of available fishing boats B. unusually stormy weather during fishing season C. the development of innovative new fishing equipment that makes it easier to catch swordfish D. an increase in the price of swordfish E. an increase in the wages of fishermen

d

A price cut will increase the total revenue a firm receives if the demand for its product is:

elastic.

Negative incentives: A. increase benefits or reduce costs. B. increase behaviors. C. decrease benefits or increase costs. D. include both cash subsidies and taxes.

decrease benefits or increase costs.

For a given increase in price, a greater elasticity of demand will result in a greater

decrease in quantity demanded For example, if a good's price increases by 1%, quantity demanded would decrease by 2%, if price elasticity of demand is 2. However, quantity demanded would decrease by 5%, if price elasticity of demand is 5.

To the extent that a governmental price control succeeds in affecting price, it can be expected to lead to a corresponding:

decrease in the volume of sales whether the price is forced up or down.

If the elasticity of demand for bangles is equal to 1, an increase in price will:

decrease the quantity demanded but leave total revenue unchanged.

A tax is imposed on wine. Sellers will bear the full burden of this tax if the:

demand curve for wine is perfectly elastic.

The government proposes a tax on flowers in order to boost its revenue. Consumers will bear no part of this tax if the:

demand for flowers is perfectly elastic.

A 10% decrease in the price of energy bars leads to a 20% increase in the quantity of energy bars demanded. It appears that:

demand is elastic and total revenue will increase.

A market economy depends on market mechanisms to: A. determine the most efficient way of using resources. B. determine how large the government's budget deficit should be. C. decide how much government regulation there should be. D. provide everyone with a minimum level of income. E. do all of the outcomes listed.

determine the most efficient way of using resources.

The function of an entrepreneur is to: A. bear the business risks. B. organize the other factors of production. C. innovate. D. do all of the tasks listed.

do all of the tasks listed.

The general consensus on minimum wage laws is that they:

do create some unemployment.

If the government wanted to reduce the quantity of a good traded, it could do so by:

doing any of the above.

A decrease in consumer incomes will: A. decrease the demand for an inferior good. B. decrease the supply of an inferior good. C. increase the demand for a normal good. D. increase the supply of a normal good. E. do none of the above.

e

To an economist, a decrease in supply means a: A. rightward shift of the supply curve. B. movement up along a supply curve. C. downward shift of the supply curve. D. movement down along the supply curve. E. none of the above

e

Which of the following would be most likely to cause a reduction in the supply of Nintendo video games? A. a decrease in the price of Nintendo video games B. a decrease in the price of computer chips used to make Nintendo games C. an increase in the demand for Nintendo video games D. a decrease in the demand for Nintendo video games E. an increase in the price of computer chips used to make Nintendo games

e

Economics is different from a "hard" science like physics because: A. economists abstract from reality in creating their theories. B. economics is easier to study than physics. C. economists must explain their theories to policy makers who lack formal mathematical training. D. economists cannot easily control all the variables that might influence human behavior. E. research in economics is primarily conducted in a very "social" way via interviews of consumers and corporate leaders.

economists cannot easily control all the variables that might influence human behavior.

A steel mill raises the price of steel by 7%, which results in a 20% reduction in the quantity of steel demanded. The demand curve facing this firm is:

elastic

Demand is said to be ____ when the quantity demanded is very responsive to changes in price.

elastic

If an increase in price causes total expenditure on a product to decrease, then the price elasticity of demand is:

elastic

Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that: A. in the man's judgment, the expected marginal cost of smoking the cigarette outweighs the expected marginal benefit. B. the man is behaving irrationally. C. the smoker is unconcerned about his future health. D. in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost. E. smoking should be banned by the government in order to ensure the safety of smokers.

in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.

You lose $20 from your wallet and decide to miss an hour from work in order to search for it. To an economist, this means that: A. you estimate the expected cost of searching for one hour to be greater than $20. B. you must earn more than $20 per hour. C. in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage. D. you are irrational, since it is always a waste of time to search for lost money. E. you place no value on your time.

in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage

interpret the following statement: "Demand exceeds the available quantity of apartment housing. if the price of apartment rentals were increased demand would decrease and an equilibrium could be achieved

incorrect because it confuses "demanded" with "quantity demanded"

The longer the time period considered, the elasticity of supply tends to:

increase

For a given increase in price, the greater is the elasticity of supply, the greater is the resulting

increase in quantity supplied

A decrease in the price of product X will:

increase the marginal utility per dollar spent on X and result in an increase in total utility from consumption X

Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a date. This offer will likely: A. not affect the opportunity cost of going on the date. B. reduce the opportunity cost of going on the date because giving up the additional work dollars will make his girlfriend feel even more appreciated. C. increase the opportunity cost of going on the date. D. reduce the opportunity cost of working.

increase the opportunity cost of going on the date

A government mandated price increase for doodads will:

increase the quantity of doodads supplied but decrease the quantity of doodads demanded. A government mandated price increase for doodads has to take the form of a price floor, a legal minimum above the equilibrium price as to make sure it is binding. As a result, a surplus ensues as quantity supplied is greater than quantity demanded. Because the price increases above the equilibrium price, then quantity supplied increases (an upward movement along the supply curve) and quantity demanded decreases (a downward movement along the demand curve).

If the elasticity of supply of bangles is equal to 1, an increase in the price of bangles will:

increase the quantity supplied and increase total revenue.

The longer the time period considered, the elasticity of supply tends to:

increase.

Elasticity of demand will ____ as the availability of substitutes ____.

increase; decreases decrease;increase both a. and c.

Which of the following is not a result of rent controls?

increased turnover as tenants move more frequently from one rental unit to another

Total utility:

increases as long as marginal utility is positive

The fact that some resources and skills cannot be easily adapted from their current uses to alternative uses is the basic reason for the law of A. increasing opportunity cost. B. decreasing opportunity cost. C. comparative advantage. D. consumer sovereignty.

increasing opportunity cost.

the demand schedule for a good:

indicates the quantities that will be purchased at alternative market prices

The benefits received principle suggests that

individuals receiving the benefits are those who pay for them

Specialization is a way for: A. individuals to make the best use of resources by devoting themselves to one primary productive activity. B. society to become wealthier while not using their resources. C. people to avoid having to trade. D. increasing one's opportunity cost for an activity.

individuals to make the best use of resources by devoting themselves to one primary productive activity

Supply is said to be ____ when the quantity supplied is not very responsive to changes in price.

inelastic

a steel mill raises the price of steel by 20% which results in a 7% reduction in the quantity of steel demanded. the demand curve facing this firm is:

inelastic

If the government wanted a tax to raise a great deal of revenue but not burden consumers much, it would want to tax an industry with:

inelastic supply and elastic demand

A steel mill raises the price of steel by 20%, which results in a 7% reduction in the quantity of steel demanded. The demand curve facing this firm is

inelastic.

A nation has a comparative advantage in the production of cars over another nation if: A. it can produce cars with fewer resources than the other country. B. it can produce cars at a lower opportunity cost than the other country. C. it can produce cars at a higher opportunity cost than the other country. D. it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country. E. it is more self-sufficient in all areas of production, including automobile manufacturing.

it can produce cars at a lower opportunity cost than the other country.

Your mother tells you, "Watching ten hours of TV per day will make you stupid." This is a positive statement because: A. your mother says it with a positive tone in her voice. B. your mother is positive that you are stupid. C. it is a proposition that can be tested. D. your mother is only thinking of your best interest. E. you're positive that your mother is stupid.

it is a proposition that can be tested.

Whenever a price ceiling is imposed in a market, it is true that:

it is necessary to know whether the ceiling is imposed above or below the equilibrium price in order to determine whether the quantity traded will be affected.

If the demand for apples is highly elastic and the supply is highly inelastic, then if a tax is imposed on apples it will be paid:

largely by the sellers of apples.

The law of diminishing marginal utility implies that the more of a commodity you consume, the

less you value additional units of output

Which of the following is a reason that marginal product will eventually begin to fall?

limited amounts of fixed inputs

When there are economies of scale in production:

long-run average total cost declines as output expands.

When there are diseconomies of scale in production:

long-run average total cost increases as output expands.

The branch of economics that focuses on outcomes in highly aggregated markets, such as the markets for labor or consumer products, is called: A. macroeconomics. B. Marxian economics. C. positive economics. D. normative economics. E. microeconomics.

macroeconomics.

When average total cost is decreasing as output expands

marginal cost must be less than average total cost.

Economists normally assume that the goal of a firm is to:

maximize profits

When economists speak of markets, they primarily mean: A. places where production of goods and services take place. B. those locations where sales of stocks and bonds of corporations take place. C. mechanisms that coordinate actions of buyers and sellers. D. the trillions of dollars that change hands in the foreign exchange markets.

mechanisms that coordinate actions of buyers and sellers.

What denotes the output level where economies are exhausted and constant returns to scale begin:

minimum efficient scale

More efficient positive market ethics will generally help improve all of the following challenges EXCEPT: A. positive externalities of a market B. negative externalities of a market C. moral externalities of a market D. consumer surplus of a market E. producer surplus of a market

moral externalities of a market

The tendency of those who are insured to take more risks is a problem of:

moral hazard

Unlike its competitors, one glass producer can use its equipment to make either windows for houses or windows for cars. Other things equal, compared to its competitors, its supply curve of windows for cars would be:

more elastic than the supply curves of competitors

In free market economies, A. most market exchanges will result in a "winner" and a "loser." B. most market exchanges will result in all parties winning. C. any market exchange will follow no rules unless government imposes them. D. regulations and other written ethics will generally limit innovation and profitability. E. there is no way to measure the optimal level or type of market ethics.

most market exchanges will result in all parties "winning."

Constant returns to scale indicate that a firm is experiencing:

per unit costs of production that remain stable as the scale of output expands.

The elasticity of supply is defined as the ____ change in quantity supplied divided by the ____ change in price.

percentage; percentage

When a person possesses a comparative advantage in the production of one good or service, it: A. means that the person's opportunity cost is higher than for that of other goods. B. discourages specialization. C. promotes greater self-sufficiency. D. permits gains from trade to be realized due to a more efficient use of resources.

permits gain from trade to be realized due to a more efficient use of resources.

Which of the following accounts for the largest percentage of federal taxas?

personal income taxes

One of the ugly stepsisters argues that she, rather than Cinderella, should go to the ball because she will derive more utility from it than Cinderalla. An economist would:

point out that making interpersonal comparisons is not possible

"Rent Control," a form of price control in which the government sets a limit to what apartment owners can charge a tenant, is a mechanism of:

price ceiling

"Rent Control," a form of price control in which the government sets a limit to what apartment owners can charge a tenant, is a mechanism of:

price ceiling.

a change in which of the following variables does not cause a change in demand

prices of unrelated goods

The total social costs of production are:

private costs plus external costs

The market system fails to provide the efficient output of public goods because:

private firms cannot restrict the benefits from those goods to consumers who are willing to pay for them.

The difference between the value of a a good to sellers and its price is known as

producer surplus

Public choice theory assumes that each voter will tend to favor the political candidate who offers:

programs that will yield the greatest personal benefits net of personal cost.

If stephen earns $100,00 this year and pays $20,000 in taxes and Chris earns $50,000 this year and pays $5,000 in taxes, this tax system would appear to be

progressive

A special interest issue is one that

provides large benefits to each of a small number of people and small costs to each of a large number of people.

if the price of music downloads decreases which of the following is most likely to occur

quantity demanded will increase

If the demand is perfectly inelastic, what would happen to the quantity demanded if there is a tiny increase in price?

quantity demanded will remain the same

the difference between a change in quantity supplied and a change in supply is that a change in

quantity supplied is caused by a change in a goods own, current price, while a change in supply is caused by a change in some other variable such as input prices, prices of related goods, expectations or taxes

When economists refer to economic behavior, they mean that: A. from time to time, everyone behaves irrationally. B. changes in incentives influence behavior in unpredictable ways. C. the pursuit of money is the most significant factor influencing decision making. D. rational people try to anticipate the likely consequences of their actions.

rational people try to anticipate the likely consequences of their actions.

Some political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they parent. The economic way of thinking indicates that legislation of this type would: A. make it more expensive for parents to provide for their children. B. reduce the value of children to their parents and therefore lead to a reduction in the birth rate. C. reduce the after-tax cost of raising children and therefore increase the birth rate. D. exert no impact on either the cost of raising children or the birth rate since parenting children is a non-economic activity.

reduce the after-tax cost of raising children and therefore increase the birth rate.

Advantages of specialization do not include: A. reduced interdependence. B. the exploitation of comparative advantage. C. the ability to utilize more complex production processes. D. gains from learning by doing. E. All of the above are advantages of specialization.

reduced interdependence.

Goods that are heavily taxed, such as alcohol and cigarettes, often have:

relatively steep demand, such that the tax burden falls primarily on buyers and the deadweight loss associated with the tax is smaller than if demand were flatter

A good economic theory: A. includes every detail that affects the economic behavior of interest. B. relies on simplifying assumptions in order to explain economic behavior. C. does not rely on simplifying assumptions. D. is impossible to achieve because of the difficulty of conducting controlled experiments. E. is normative and therefore not testable.

relies on simplifying assumptions in order to explain economic behavior.

Economists believe that individuals act as if they are motivated by self-interest and: A. respond selfishly. B. respond in predictable ways to changing circumstances. C. it leads to inconsistent and unpredictable behavior. D. all of the above.

respond in predictable ways to changing circumstances.

As the market price of a good falls due to an increase in supply, consumer surplus:

rises

Economic goods are: A. only those commodities priced in monetary terms. B. scarce products that are created from scarce resources. C. the opposite of normative economic goods. D. not subject to scarcity. E. only theoretical, not real.

scarce products that are created from scarce resources.

Economic choices or tradeoffs are the result of: A. basic human greed B. scarcity. C. poverty. D. private ownership of resources. E. the fallacy of composition.

scarcity

Total revenue represents the amount that:

sellers receive for a good or service which is computed as PxQ.

if there is surplus____ will be frustrated by their inability to exchange at the current price and they will ___ the prices as a result

sellers;lower

As a result of the imposition of a tax on a product:

some consumer and produceer surplus is transferred from buyers and sellers to the governement

Economics is most importantly concerned with... A. how to profit from trading in the stock market. B. government taxation and spending. C. studying how we allocate scarce resources to satisfy unlimited wants. D. how to reduce inflation. E. how to successfully launch a business.

studying how we allocate scarce resources to satisfy unlimited wants

Total utily can be determined by:

summing the marginal utilities of each unit of a good consumed.

a market supply schedule reflects the total quantity

supplied at each price by all of the producers

an upward -sloping supply curve shows the

suppliers are willing to increase production of their good if they receive higher prices for them

In free markets which allows a high level of unethical corruption: A. Suppliers may be forced to be corrupt or to leave the market. B. Consumers will be forced to be corrupt. C. Firms will always earn large long-term profits. D. the products sold will be worthless. E. there will be more creativity and competition than in highly ethical markets.

suppliers will be forced to be corrupt or to leave the market

A tax is imposed on orange juice. Consumers will bear the full burden of this tax if the:

supply curve for orange juice is perfectly inelastic

A tax is imposed on orange juice. Consumers will bear the full burden of this tax if the:

supply curve for orange juice is perfectly inelastic.

Ceteris paribus, if an 8% increase in price leads to a 6% increase in the quantity supplied, then:

supply is inelastic. Supply is inelastic since an 8% increase in price leads to a 6% increase in the quantity supplied for a supply elasticity coefficient of 6 / 8 = 0.75. For supply to be inelastic, an 8% increase in price has to lead to a less than 8% increase in the quantity supplied as to make the supply elasticity coefficient Es < 1. That being the case, the answer is valid.

An increase in demand will increase the quantity sold but not the price in a market if:

supply is perfectly elastic

For a given decrease in demand, the effect on price is smallest and the effect on quantity exchanged largest when:

supply is perfectly elastic.

A regressive tax:

takes a greater proportion of the income of lower-income groups than of higher-income groups

Which of the following are means by which the government redistributes income?

taxes, subsidies, transfer payments

A 25% decrease in the price of breakfast cereal leads to a 20% increase in the quantity of cereal demanded. As a result:

total revenue will decrease

The fallacy of composition is: A. the erroneous view that an economic activity can sometimes exceed the sum of its components. B. the erroneous view that what is true for the individual will also be true for the group. C. the view that the aggregation of economic activity will necessarily lead to an outcome that is different than the outcome generated by each individual in the group. D. the idea that association need not imply causation. E. the failure to hold other variables constant when analyzing the relationship between two particular variables.

the erroneous view that what is true for the individual will also be true for the group.

If a student enrolls in an additional course at the university, an economist would conclude that: A. the total benefit that the student expects to receive as a result of completing her college degree exceeds the total cost of her college education. B. the student is not following the rule of rational choice. C. the student must not be involved in extracurricular campus activities. D. the expected marginal benefit of an additional course must exceed the expected marginal cost of the course.

the expected marginal benefit of an additional course must exceed the expected marginal cost of the course

Human capital is: A. the same as labor. B. a term describing the tools and equipment owned by households. C. a worker's physical effort when working with machines. D. the expertise or knowledge possessed by workers. E. the money in checking, savings, or CD accounts at banks.

the expertise or knowledge possessed by workers.

When a firm makes zero economic profit, it means that:

the firm is covering the total opportunity costs of its resources.

other things being equal, the flatter demand is:

the greater the deadweight loss is returning grom the imposition of a particular tax on a product

The opportunity cost of an item is: A. The total value of opportunities you give up to get that item. B. the highest valued alternative you give up to get that item. C. the value of all available alternatives you sacrifice to get that item. D. always equal to the dollar value of the item. E. always less than the dollar value of the item.

the highest valued alternative you give up to get that item.

The opportunity cost of an action is equal to: A. the monetary payment the action required. B. the total time spent by all parties in carrying out the action. C. the highest valued opportunity that must be sacrificed in order to take the action. D. the value of all of the alternative actions that could have been taken. E. zero, as only goods cost money.

the highest valued opportunity that must be sacrificed in order to take the action.

Starting from an equilibrium position,

the imposition of a price floor above the equilibrium price will decrease the quantity demanded.

The short run is not the same length of time for all firms and industries because:

the life span of capital and the extent of capital specialization will vary across firms and industries.

when there is an excess quantity supplied of a product at the current price then

the market price must be above equilibrium price the market price will tend to fall

Price elasticity of demand is defined as:

the percentage change in quantity demanded divided by the percentage change in price.

when there is an excess quantity demanded of a product at the current price when

the price will tend to rise

Private costs are those born by:

the producer of an item

Macroeconomic topics do not usually include: A. the rate of inflation. B. the rate of unemployment. C. economic growth. D. the profit maximizing decisions of an individual manufacturer. E. the control of the money supply by the central bank.

the profit maximizing decisions of an individual manufacturer.

Entrepreneurship is: A. human capital. B. another word for the financial capital that can be used to start a business. C. the resource that organizes the other factors of production in order to produce goods and/or services. D. another word for physical capital that is used to produce goods and services.

the resource that organizes the other factors of production in order to produce goods and/or services.

Say that the equilibrium price of natural gas would be $5 per thousand cubic feet, but there is a price ceiling imposed at $3 per thousand cubic feet. That price ceiling is then lowered to $2 per thousand cubic feet. As a result,

the shortage of natural gas will get worse

Say that the equilibrium price of natural gas would be $5 per thousand cubic feet, but there is a price ceiling imposed at $3 per thousand cubic feet. That price ceiling is then lowered to $2 per thousand cubic feet. As a result,

the shortage of natural gas will get worse.

Human capital is: A. machinery owned by firms, but not by individuals. B. machinery owned by individuals, but not by firms. C. machinery owned by individuals or firms, but not by the government. D. the skill or knowledge of individuals.

the skill or knowledge of individuals.

Say that the equilibrium price of natural gas would be $5 per thousand cubic feet, but there is a price floor imposed at $7 per thousand cubic feet. That price floor is then lowered to $5 per thousand cubic feet. As a result,

the surplus of natural gas will be eliminated.

If Tom purchases and consumes an entire pizza, which of the following is likely to be true?

the total utility of the first two pieces will be positive and the marginal utility of the second piece will be less than the marginal utility of the first piece

Which of the following are variable costs of production?

the wages paid to non-salaried employees, the cost of wood used to produce furniture, the cost of electricity that powers the lighting and computer systems in an office building.

A deadweight loss occurs as a result of a per-unit tax because:

there is a decline in output for units for which the marginal benefit exeeds the marginal cost

In a competitive economy with no government sector:

there will be too few public goods produced

Economists believe that in regards to criminal behavior: A. people engage in criminal activity because they are genetically predisposed to do so. B. those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs. C. individuals are irrational and don't respond to incentives. D. economics can shed very little light on the subject.

those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs

In the market for insurance, the moral hazard problem leads:

those who buy insuraunce to take fewer precautions to avoid the insured risk

The ability to pay principle suggests that:

those with the greatest ability to pay taxes should pay more than those with the least ability to pay taxes

Assume that production of a good generates exteranl benefits for other. The equilibrium price of the good will be ____ and the equilibrium quanity ______ for efficient resource allocation.

too high; too low

Assume that production of a good imposes external costs on others. The equilibrium price will be ____ and the equilibrium quanity _____ for efficient resource allocation

too low; too high

Which of the following best defines rational behavior? A. analyzing the total costs of a decision B. analyzing the total benefits of a decision C. undertaking an activity as long as the total benefit of all activities exceeds the total cost of all activities D. undertaking activities whenever the marginal benefit exceeds the marginal cost E. undertaking activities as long as the marginal benefit exceeds zero

undertaking activities whenever the marginal benefit exceeds the marginal cost

A secondary effect of an action that may occur after the initial effects is known as a(n):

unintended consequence.

Demand is said to be ____ when the quantity demanded changes the same proportion as the price.

unit elastic

inferior good

used clothing

Because of scarcity: A. we must sacrifice valuable alternatives to obtain more goods and services we desire. B. the opportunity cost of consumption is zero. C. we can obtain more of a desirable good without sacrificing other goods and services. D. shortages of goods prevail at current market prices. E. both a. and d. are correct.

we must sacrifice valuable alternatives to obtain more goods and services we desire

Which of the following is not true? a.) voluntary exchange is expected to be advantageous to both parties to the exchange b.) what one trader gains from a trade, the other must lose c.) if one party to a potential voluntary trade decides it does not advance his interests, he can veto the potential trade. d.) the expectation of gain motivates ppl to engage in trade.

what one trader gains from a trade, the other must lose.

In economics the demand for a good refers to the amount of the good people:

will buy at various prices

A situation in which the winner of an auction is worse off than the loser because of innaccurate valuation is known as:

winner's curse

The price of a pound of sirloin steak is five times the price of a pound of ground beef. You are not in consumer equilibrium unless:

your marginal utility from the last pound of sirloin steak consumed is five times that of the last pound of ground beef consumed.

A flat tax allows individuals to deduct a standard allowance of $25000 from their wages. Assume that the flat tax rate is 12% How much income tax would you have to pay if you were earning $20,000 a year?

zero