BADM1001 MOD 2 ECONOMIC ENVIRONMENT STUDY SET
Which of these does research show is the best study technique? (2)
Doing practice questions
Which of these is the most effective way to learn a new topic?
Doing practice questions about the topic
A market economy includes which following characteristic?
Economic decision-making happens through markets.
If a business finds its production is becoming more efficient as it increases production, the organization is experiencing what specialization advantage?
Economies of scale
When the price in some market is below its equilibrium price:
a shortage exists.
Consider the combined yearly onion supply and demand schedules for one local supermarket below. Currently the market is at the equilibrium price A. Fill in the values for A and B that would cause market equilibrium to occur at that price.
a) $0.90; b) 80
Natalie runs a fast food stand selling hot dogs and soft drinks. A decrease in the price of which good below is likely to negatively impact her bottom line?
hamburgers
Michael is the owner of a steel refinery in Pittsburgh, PA. The market (his sales) price for a ton of steel increased from $400 per ton in October to $600 per ton in November. According to the law of supply, what would be a rational response by Michael to this change in the market price for steel?
hire additional workers and increase output
Use the information you just read in the text to think about the following scenario. The computer software industry is more likely to achieve economies of scale if it is located
in or close to large cities with large numbers of technology workers.
Over the past 10 years consumer incomes have grown by 15%, while the price of automobiles has increased by over 20%. Tires and automobiles are complement goods. What would be a reasonable expectation regarding the demand for tires today compared to 10 years ago?
it is impossible to know with the given information.
Several unfavorable changes have occurred this past year for almond suppliers in California. A drought continues to ravage crops, and a recent strike by migrant farm laborers has sent production costs soaring. In response to these recent events the almond growers lobby has successfully petitioned the California state legislator for a significant subsidy to almond farmers. Given these events, how would we expect the supply curve for almonds to react?
it is impossible to tell with the given info
The graph below shows the supply and demand curves for air conditioners. Show the equilibrium by clicking on the graph to place a dot at the place where the equilibrium point is.
its where the 2 lines intersect
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the:
law of demand.
You are given the following demand schedule for used cars. Which of the following demand curves accurately represents this demand schedule and has proper formatting?
little curve at top and then straight down
Economic policy decisions made by or involving individual states within the U.S. are classified as ________ decisions.
macroeconomic
The field of economics that looks at the economy as a whole and focuses on broad issues such as growth, unemployment, inflation, and trade balance is:
macroeconomics
An analysis of unemployment rates of the countries in North America since 2008 is an application of:
macroeconomics.
In a world of scarcity, we will never
meet all of society's wants
The field of economics that focuses on the actions of individual agents within the economy, like households, workers, and businesses is:
microeconomics.
The economy of Atlantia is defined by the private ownership of the means of production. Although products produced and prices are based on market factors, the government intervenes as a regulator to ban harmful products and to set a minimum wage. Atlantia is an example of a ________ economy.
mixed market
The downward slope of a demand curve illustrates the pattern that as ________ rises, ________ decreases. (17)
price : quantity demanded
Falling economic indicators typically signal ________ in the economy. (9)
recession
Raising public transportation fares:
reduces the opportunity cost of driving one's car
The unemployment rate generally ________ during contractions and ________ during expansions.
rises: falls
The market for corn is defined by the graph below. If the price is set at $20/ton will this result in a surplus or shortage? What is the magnitude of this surplus or shortage?
shortage of 80 million tons
Which of these does research show is the best study technique?
spacing out your practice over time
A severe freeze has damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of: (3)
supply curve
The relationship between the price in a market and the amount that producers collectively make available for sale, is referred to as:
supply.
Which of the following demand curve for tomatoes violates the law of demand?
the backwards s- shaped graph
Each of us face decisions in our lives that require us to make choices, knowing that:
the best choice is relative to the value of the next best alternative.
The equilibrium price for Gizmos Puzzle Toys is $12, but Gizmos are currently priced at $10 throughout the market. In the typical store that sells Gizmos, we might expect:
the box of available Gizmos is often empty.
As an economist at the USDA you observe there has been a change in the market for processed corn this past year (displayed below). Which option below can best explain this recent market shift? />>/
the cost of farm labor has decreased
When a market is experiencing a shortage, or "excess demand":
the equilibrium price is higher than the current market price.
Smith's theory of the division and specialization of labor implies that a worker skilled in engineering will
yield economic output that is sub-optimal if she were employed in something other than engineering-type functions.
The point of a business cycle fluctuation during which growth ceases and the economy has hit a bottom is called a(n):
trough
Below is the demand curve for oranges in a Florida supermarket. Select the demand schedule that best corresponds to this demand curve.
1-$10;2-$9;3-$8;4-$7 etc.
Why does the demand or supply curve shift the way it does and what element of demand caused the shift? How does that affect the equilibrium price and quantity? (Suppose Congress cuts personal income tax rates.)
A decrease in tax rates effectively increases your income. An increase in income generally increases demand. Therefore demand curve shifts to the right to show an increase in the equilibrium price and quantity.
You are in charge of data analytics for Home Depot's South Florida division. Recently you have observed a change in the market for power generators illustrated below. Which explanation best corresponds with the observed data?
A hurricane is expected to arrive next week
Why does the demand or supply curve shift the way it does and what element of demand caused the shift? How does that affect the equilibrium price and quantity?
A pay cut decreases production costs for the firm. A decrease in production cost generally increases supply. Therefore supply curve shifts to the right to show a decrease in the equilibrium price and an increase in the equilibrium quantity.
You are the chief data analyst of the U.S. Fish and Wildlife Service for the Northeast region. Recently the agency has become concerned about overfishing in the North Atlantic fisheries, and you are charged with estimating the demand curve for tuna as part of the agency's mitigation efforts. From public surveys you know that when the price of a freshly caught tuna is $400, the public will demand a quantity of 1 million fish. If the price is $275 then the public will demand 4 million fish. Finally, if the price was $185 consumers will demand a quantity of 8 million fish. Which curve below could be the correct demand curve for North Atlantic tuna given these three data points?
A, the blue curve
An economy is composed entirely of two equally sized farms A and B producing both eggs and milk. Farm A is better at producing eggs than Farm B which is better at producing milk. Then in order to maximize output, Farm A should
Abandon the production of milk to fully specialize in the production of eggs and then trade with Farm B for milk
Which of the following is an example of frictional unemployment as defined in the text?
An auto worker has received a job offer two states away, and must take off one month between jobs in order to relocate.
An extended period of decline with no improving indicators typically signals a ________ in the economy.
Depression
Which one of the following countries exhibits characteristics of a command economy? (16)
China
Jane is an unemployed construction worker desperate to find employment so she can cover her mortgage and basic living expenses. She is willing to work for any wage, yet is unable to find any paid work given the poor state of the economy. She continues her search despite the lack of opportunities. Which of the following economic terms best describes Jane's current predicament?
Cyclinal Unemployment
Suppose Congress cuts personal income tax rates. Which graph most accurately shows how this would affect the market for air conditioners? Note that the new curve is shown in grey.
Demand curve shifts right:
Due to the negative health effects of smoking the number of cigarette consumers has steadily decreased over the past decade. During the same time period more permissive immigration laws has allowed for cheaper tobacco harvesting using migrant labor. As an economist, what movements in equilibrium quantity and price do you predict given the above information?
Equilibrium price will decrease while quantity cannot be determined
The past year has had very favorable growing conditions for oranges in California. At the same time, a new study reports that eating citrus fruits are linked to better health and longevity. As an economist, what movements in equilibrium quantity and price do you predict given the above information?
Equilibrium quantity will increase while price cannot be determined
The market value of all goods and services produced by the economy in a given year is known as:
Gross Domestic Product (GDP).
The main economic indicators include
Gross Domestic Product, Inflation, Unemployment
Jane Doe is a shop owner in the fictional country of Xanadu. Every month the government's planning ministry sends her a large booklet (which resembles a phone book) regulating the price of essential commodities including milk, flour, and eggs. In response to these regulations Jane Doe has reduced her inventory of essential goods and switched to selling luxuries such as cakes, pies, and soft drinks. Luxury goods are not price controlled. Does Jane Doe reside in a command economy? Why or why not?
Jane does not reside in a command economy. She owns her own business and is free to make some production and price decisions.
If a decrease in the price of MP3 players decreases the demand for CD players, this means that: (14)
MP3 players and CD players are substitutes.
You are the leader of a revolutionary movement which has recently overthrown the government of the tiny country of Tropico. During the 3rd Party Congress, which was held shortly before your glorious victory, the party committee decreed that "to free Tropico's struggling masses from the jackboots of capitalism and reactionary imperialism, it is necessary to immediately enforce a command economy upon realization of our final victory." Which of the following actions would betray your mandate to create a command economy in Tropico?
Maintain private ownership, but legalize labor unions which will now be free to bargain with private businesses for improved wages and benefits
What will we never do in a world of scarcity?
Meet all of society's wants.
Take a stab at this question (you'll need to do some multiplication). Every day, 500,000 drivers in Los Angeles incur an additional 30 minutes of traffic delays when commuting by car to their jobs. In Boston, the delays amount to 45 minutes for 200,000 drivers. If the price of time is $15/hour in Los Angeles and $25/hour in Boston, which city incurs the largest opportunity cost?
Neither
If an increase in the price of Nike shoes increases the demand for Adidas shoes, this means that
Nike shoes and Adidas shoes are substitutes
Which of the following describes a business cycle?
Periods of increasing and decreasing real Gross Domestic Product (GDP).
Marquise is studying for his Biology test. He only has an hour because he has lots of other homework to get through as well. What's the best use of Marquise's time?
Practicing by answering questions (in his homework or from the textbook)
Suppose that air conditioner workers accept a pay cut of 2 dollars per hour. Which graph most accurately shows how this would affect the market for air conditioners? Note that the new curve is shown in grey.
Supply curve shifts right
You are a consultant analyzing the American car market for the new Toyota Prius. Your chief competitor Tesla has recently dropped the list price of their vehicles by 20%. When illustrating shifts of the demand curve it is customary to draw arrows to show the direction of change. Which directions should the arrows be drawn in the graph below? Which curve represents old demand and which curve the new demand?
The arrows should be drawn pointing leftwards. The curve on the right represents the old demand and the curve on the left represents the new demand.
Suppose that a family decides to spend all of their available money on a fancy vacation instead of purchasing a much needed new automobile. From an economist's perspective, which of the following statements about this decision is likely to be true?
The decision is rational in the sense that it reflects the family's preference for vacations over new automobiles.
Here are the equations for the demand and supply curves: Demand curve: Qd=3300−2P Supply curve: Qs=500+8P
The equilibrium price value: $280 the equilibrium quantity value: 2740
List and explain three out of the four factors responsible for shifts in the supply curve.
The four factors that can shift the supply curve include natural conditions, input prices, technology, and government. Natural conditions include any natural event that may favorably or unfavorably impact production. Lower input costs will increase the profit margin of the supplier, encouraging them to provide more output at any given price. Improved technology can increase what a supplier can produce with a given set of inputs. Government intervention can either encourage or discourage production depending on the type of intervention (subsidy vs. tax, regulation vs. deregulation, etc).
Which of the following is a defining feature of free markets?
The gov. does not interfere in any way with the economic decisions of buyers and sellers.
Identify the microeconomic topic(s) among the following: (10)
The price that a farmer asks for her watermelons.
The following condition describes the economic term "scarcity": (15) ?
The time it takes to learn a new skill. (NOT THE ANSWER)
The ________ rate generally rises during contractions and falls during expansions.
Unemployment
What is one of the benefits of specialization in labor?
Workers who specialize in certain tasks often learn to produce more quickly and with higher quality.
A decrease in the quantity supplied can be the result from:
a decrease in price.
When economists talk about supply, they are referring to a relationship between the price in a market and the:
amount that producers collectively make available for sale.
According to the law of demand, assuming other factors are held constant: (11)
as the price of bread increases, the quantity of bread demanded will decrease
According to the law of demand, assuming other factors are held constant:
as the price of milk decreases, the quantity of milk demanded will increase.
According to the law of supply, assuming other factors are held constant:
as the price of milk decreases, the quantity of milk supplied will decrease
Changes in gross domestic product result in: (13) ?
business cycle fluctuations
The law of demand states that as the price of a good decreases:
buyers desire to purchase more of it
Because of our limited money, time, and effort, we are best off when we allocate those things:
by constantly assessing the opportunity costs of our choices.
The point of a business cycle fluctuation during which growth slows, unemployment increases, and pricing pressures subside is called a(n):
contraction
When ________, a typical firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right. (12)
costs of production fall
When ________, business firms will collectively supply a higher quantity of output at any given price, and the supply curve will shift to the right
costs of production fall
When ________, business firms will collectively supply a higher quantity of output at any given price, and the supply curve will shift to the right.
costs of production fall
When ________, business firms will collectively supply a lower quantity of output at any given price, and the supply curve will shift to the left.
costs of production increase
The market for cement in a small town is defined by a demand curve that passes through the points ($50/ton, 300 tons), ($100/ton, 200 tons), ($150/ton, 100 tons). Meanwhile we know the supply curve passes through the points ($150/ton, 300 tons), ($100/ton, 200 tons), ($50/ton, 100 tons). If the market starts in a surplus of 200 tons, how much must the price change before the market is in equilibrium?
decrease by $50/ton *if there is a surplus of 200 tons then the price must be $150 (300 tons supplied - 100 tons demanded = 200 tons surplus) eqilibrium is at $100/ton so the price must be decrease by $50
Complete the following sentence: If people think that the price of televisions will decrease in the near future, that belief may cause a(n)
decrease in the demand for televisions today.
Complete the following sentence: If people think that the price of televisions will decrease in the near future, that belief may cause a(n):
decrease in the demand for televisions today.
If the process of producing a good or service is broken into a number of tasks each performed by a different individual instead of one person performing all of the tasks, this is known as:
division of labor
Market economies are based on private enterprise, which means
economic decision-making happens through markets.
Government expenditures on public schools is classified as ________ policy.
fiscal
The Coalatree company makes travel clothes, gear, hammocks, and blankets. The company used Kickstarter to fund increased production of its new "Trailhead Pants" line. Increase production has resulted in a decrease in the average per pant production cost. This increase in production efficiency is an example of: (4)
economies of scale
The one unique point in which quantity demanded equals quantity supplied is called:
equilibrium.
In a market with an upward sloping supply curve and a downward sloping demand curve, when the actual price must be higher than the equilibrium price, there will be:
excess supply.
When the actual price in some market is above the equilibrium price, the resulting market condition is known as: (1)
excess supply.
If the economy is currently experiencing high growth and inflation combined with low unemployment, it is likely to be at which phase of the business cycle?
expansion
A business cycle reflects changes in economic activity, particularly real GDP. The phases of a business cycle, in order, are:
expansion, peak, contraction and trough.
If a community college decided to build an academic building, then the money and resources would not be available for a parking garage. This is an example of: (6)
opportunity cost.
During an economic ________, business is booming, prices are high, and it is difficult to hire new workers because virtually everyone who wants to work is already employed. (7)
peak
A demand curve shows the graphical relationship between quantity demanded and:
price
A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ________, shown on the horizontal axis. (8)
quantity supplied
In the past year the price of pork, the main ingredient in hot dogs, has decreased by 20%. At the same time the price of hot dog buns has also dropped 20%. How will the new equilibrium quantity and price for hot dogs compare with the original equilibrium before these price changes? Hint: Using a pen and paper to illustrate supply and demand shifts could be helpful for this question
the equilibrium quantity in the hot dog market will increase relative the old equilibrium, yet the effect on price is impossible to determine
Below there are three supply schedules documenting the relationship between motor oil price and quantity supplied. A: Price and Supply of Motor OilPrice (per gallon)Quantity Supplied (millions of gallons)$2.00700$2.20800$2.40900$2.601000$2.801100$3.001200$3.201300 B: Price and Supply of Motor OilPrice (per gallon)Quantity Supplied (millions of gallons)$3.20700$3.00800$2.80900$2.601000$2.401100$2.201200$2.001300 C: Price and Supply of Motor OilPrice (per gallon)Quantity Supplied (millions of gallons)$2.00700$2.20800$2.40900$2.601000$2.801100$3.001200$3.201100 Which supply schedule shown is wholly consistent with what you learned regarding the law of supply?
the points are: Price and Supply of Motor OilPrice (per gallon)Quantity Supplied (millions of gallons) ($2.00,700)($2.20,800)($2.40,900)($2.60,1000)($2.80,1100)($3.00,1200)($3.20,1300)
The equilibrium price for Gizmos Puzzle Toys is $10, but Gizmos are currently priced at $12 throughout the market. In the typical store that sells Gizmos, we might expect: (5)
the store has a surplus of generic brand puzzles. (NOT THE ANSWER)
A severe drought has damaged the Washington state apple crop. As a result apple producers will pay more for apples and ultimately consumers will have to pay more for apple juice at the grocery store. The impact on the market for apple juice will cause which of the following to shift to the left?
the supply curve
A competitive market is one in which:
there are a large number of buyers and sellers.
When quantity demanded decreases in response to a change in price:
there is a movement from one point to another along the demand curve.
As member of the "Hungry for Apples?" national advertising campaign you are charged with analyzing future trends in Apple prices. The estimated demand and supply curve for apples is displayed below. If the current price is $100/ton, by how much must prices change before the market is in equilibrium? Is there currently a surplus or shortage in the current market for apples?
there is a surplus. the price must drop by $10/ton