Chapter 2- HW *Unfinished*, ch 2. some tools of the economists: aplia homework, ECON 102- Problem Solving: Thinking Like an Economist, ECON 330 CH 1, ch 1 hw econ, Economics Final 2100, Macroeconomics Chapter 2

Suppose Sam is currently using combination D, producing one boat per day. His opportunity cost of producing a second boat per day is ____ per day.

2 kites

If the price elasticity of demand for a good is 0.25, then a 20 percent decrease in price results in a a) 80 percent increase in the quantity demanded b) 4 percent increase in the quantity demanded c) 5 percent increase in the quantity demanded d) 0.0125 percent increase in the quantity demanded

5 percent increase in the quantity demanded

Suppose that in the hypothetical country of Caffistan, coffee mugs are distributed to whoever is willing to pay the most. This distribution rule gives the residents of Caffistan an incentive to spend time A. Earning Money B. Lobbying Government Officals C. Maintaining their place on the line

A. Earning Money

When the supply of a good decreases and the demand for the good remains unchanged, consumer surplus A. decreases. B. increases. C. is unchanged. D. may increase, decrease, or remain unchanged.

decreases

Kenji is training for a triathlon, a timed race that combines swimming, biking, and running. Consider the following sentence: Kenji has only 20 hours per week that he can devote to training for his race. Which basic principle of individual choice does this sentence best illustrate? A. All costs are opportunity costs. B. People usually exploit opportunities to make themselves better off. C. Resources are scarce. D. Many decisions are made on the margin.

C. Resources are scarce.

If the government removes a tax on a good, then the quantity of the good sold will a) increase b) not change c) decrease d) all of the above are possible

increase

Positive

Positive/Normative: If taxes were lowered, government revenues would actually increase

How does PPF shows trade off ?

The production possibilities frontier shows the opportunity cost of one good as measured in terms of the other good. the slope of ppf measures the opportunity cost of x in terms of y

Draw the circular-flow diagram

look at ch 2

Shortly after the price of beef increases, the price of chicken increases also because a) the goods are substitutes and the higher price of beef increases demand for chicken b) the goods are complements and the higher price of beef increases demand for chicken c) buyers are irrational d) sellers are taking advantage of consumers

the goods are substitutes and the higher price of beef increases demand for chicken

Macroeconomics

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

For a shortage, pressure is moved ________

upward

Which of the following is likely to have the most price inelastic demand a) chocolate b) Hershey's chocolate c) Godiva chocolate d) all three would have the same elasticity of demand because they are all related

chocolate

If a price ceiling is in place and it is binding, the market will a) remain in equilibrium, unaffected b( the price floor b) experience a shortage c) experience a surplus d) adjust the equilibrium price until it is equal to the price floor

experience a shortage

If a price floor is in place and it is binding, the market will a) remain in equilibrium, unaffected b( the price floor b) experience a shortage c) experience a surplus d) adjust the equilibrium price until it is equal to the price floor

experience a surplus

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to a) fall by 200 percent b) rise by 40 percent c) fall by 40 percent d) rise by 200 percent

fall by 40 percent

the monopolist is a price taker

false

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost? a. monopoly only b. monopoly, monopolistic competition, and perfect competition c. monopoly and monopolistic competition d. the answer cannot be determined without knowing whether the market is in the long run or short run

monopoly and monopolistic competition

Capital

physical plants, machinery, and equipment used to produce other goods

What does PPF demonstrates?

scarcity, efficiency, trade-offs, opportunity cost, and economic growth

Today's supply curve for iPods could shift in response to a change in A. the number of buyers of iPods. B. today's price of iPods. C. the expected future price of iPods. D. All of the above are correct.

the expected future price of iPods.

Which of the following pairs of goods would be an example of substitutes a) Computers and printers b) Petrol and cars c) Cooking Oil and gold balls d) Lamb and beef

Lamb and beef

Microeconomics or Macroeconomics? The effect of a large government budget deficit on the economy's price level

Macroeconomics

Classify the following topics as relating to microeconomics or macroeconomics. 1) a family's decision about how much income to save 2) the effect of government regulations on auto emissions 3) the impact of higher national saving on economic growth 4) a firm's decision about how many workers to hire 5) relationship between the inflation rate and changes in the quantity of money

1) micro 2) macro 3) macro 4) micro 5) macro

Classify each of the following statements as positive or normative. Explain. 1) Society faces a short-run trade-off between inflation and unemployment. 2) A reduction in the rate of money growth will reduce the rate of inflation. 3) The Federal Reserve should reduce the rate of money growth. 4) Society ought to require welfare recipients to look for jobs. 5) Lower tax rates encourage more work and more saving.

1) positive 2) positive 3) normative 4) normative 5) positive

Candonia has a comparative advantage in the production of _____ , while Desonia has a comparative advantage in the production of _______ . Suppose that Candonia and Desonia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of ______ million pounds of potatoes and ____ million pounds of tea.

1. potatoes 2. tea 3. 60 4. 54

Many underdeveloped economies have a large number of squatters—people who occupy a plot of land without any deed existing to give anyone formal ownership. Therefore, they use the land and its resources, but they do not officially own the land. How might the lack of well-defined property rights hold back economic growth? Check all that apply.

1. the land squatters occupy is not protected against seizure by someone else. 2. squatters cannot mortgage, or borrow against, the land.

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about A. 2.70%. B. 0.83%. C. 1.20%. D. 0.67%.

1.20%.

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is a) 1.22, and basketball tickets are a normal good b) 0.82, and basketball tickets are an inferior good c) 0.82, and basketball tickets are an inferior good d) 1.22 and basketball tickets are a normal good

1.22 and basketball tickets are a normal good

Entrepreneurship

A wheat farmer in Nebraska takes a risk and starts a new farm on land that was previously thought unfit growing wheat. If his new farm succeeds because of the farmer's new growing technique, the farmer will earn a substantial profit. Because it represents a person's creative input to production, the innovation of using a new farming technique is an...

Despite their differences, with which proposition are two economists chosen at random most likely to agree?

A) Tariffs and import quotas generally reduce economic welfare B) Minimum wage laws do more to harm low-skilled workers than help them. C) Lawyers make up an excessive percentage of elected officials. Answer is A.

Suppose an economist believes that the price level in the economy is directly related to the money supply, or the amount of money circulating in the economy. The economist proposes the following relationship: P=A×M • P=Price Level • M=Money Supply • A=A composite of other factors, including real GDP, that change very slowly over time. How might an economist gather empirical data to test the proposed relationship between money and the price level?

An economist would look for data on past changes in the money supply, and note the resulting changes in the price level

Based on this model, households earn income when *firms* purchase *resources* in resource markets.

Based on this model, households earn income when ____ purchase ____ in resource markets.

Suppose Ireland produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier (also known as the production possibilities curve) for wheat, an agricultural good, and industrial robots, a capital good. Drag the production possibilities frontier (PPF) on the graph to show the effects of a breakout of avian flu that sickens millions of workers.

Because of the flu epidemic, less labor is available for the production of both wheat and industrial robots. For instance, when you look at the vertical axis, you see that if Ireland produces zero bushels of wheat, it can initially produce a maximum of 240,000 industrial robots per year. Because the flu epidemic decreases the number of industrial robots Ireland can produce, you should have moved the point to 160,000 industrial robots per year. Similarly, when you look at the horizontal axis, you see that if Ireland produces zero industrial robots, it can initially produce a maximum of 150 million bushels of wheat per year. Because the flu epidemic decreases the amount of wheat Ireland can produce, you should have moved the point to 100 million bushels of wheat per year.

Tim is a skilled toy maker who is able to produce both trucks and balls. He has 8 hours a day to produce toys. The following table shows the daily output resulting from various possible combinations of his time. On the following graph, use the blue points (circle symbol) to plot Tim's initial production possibilities frontier (PPF).

Blue graph points: (0,19) (1,18) (2,15) (3,11) (4,0) Green graph points: (0,19) (2,18) (4,15) (6,11) (8,0)

Suppose that, in an attempt to combat severe inflation, the government decides to decrease the amount of money in circulation in the economy. This monetary policy __________ the economy's demand for goods and services, leading to__________ product prices. In the short run, the change in prices induces firms to produce __________ goods and services. This, in turn, leads to a__________ level of unemployment. In other words, the economy faces a trade-off between inflation and unemployment: Lower inflation leads to_________ unemployment

Decreases lower fewer higher HIGHER

Suppose Canada produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for corn, an agricultural good, and construction vehicles, a capital good. Drag the production possibilities frontier (PPF) on the graph to show the effects of a breakout of avian flu that sickens millions of workers. Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther.

Drag the PPF graph down, it should go from 120 to 80 ( CORN in Millions of Bushels)

Why do economists so often appear to give conflicting advice to policymakers?

Economists may disagree about the validity of alternative positive theories about how the world works. Economists may have different values ( is policy fair) and therefore different normative views about what government policy should aim to accomplish.

Suppose that quantity demand falls 30% as a result of 5% increase in price. The price elasticity of demand for this good is a) Elastic and equal to 0.17 b) Elastic and equal to 6 c) Inelastic and equal to 6 d) Inelastic and equal to 0.17

Elastic and equal to 6

Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market a) Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous b) Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous c) Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous d) none of the above is correct

Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous

Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market? A. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. B. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. C. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. D. None of the above is correct.

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous

Implicit Cost or Explicit Cost? The wages and utility bills that Bob pays

Explicit Cost

Suppose that Jake, an economist from a university in Arizona, and Latasha, an economist from a university in Massachusetts, are arguing over government intervention. The following dialogue shows an excerpt from their debate: Latasha: The usefulness of government intervention in the economy is a long-standing issue that economists continue to debate. Jake: I feel that government involvement in the economy should be reduced because government programs cause more harm than good. Latasha: While I do agree that government programs can be inefficient, I really think they are necessary to help the less fortunate. The disagreement between these economists is most likely due to ___________.

Fill in the blank answer: -Differences in values.

The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. *circular flow model should be here but couldn't find an image to add* Based on this model, households earn income when ____ Correct purchase ____ Correct in factor markets.

Firms, Factors

Which of the following is a positive statement a) The tax on carried interest should be equal to the tax on ordinary income b) Affordability ought to be the primary concern with regards to food, health care, shelter, and education c) Americans ought to be allowed to work for whatever wages they want to d) Increasing taxes on cigarettes harms low-income Americans the most

Increasing taxes on cigarettes harms low-income Americans the most

Suppose South Africa produces only two goods: corn and laptops. The following graph shows South Africa's current production possibilities frontier, along with six output combinations represented by black points (plus symbols) labeled A to F. Complete the following table by indicating whether each point represents output combinations that are inefficient, efficient, or unattainable. Check all that apply.

Inefficient: C, D Efficient: E, F Unattainable: A, B

example of difference in values in economics

Is this policy fair? If not, who pays too much and who pays too little? Does it matter whether Paula's low income is due to a medical disability or to her decision to pursue an acting career? Does it matter whether Peter's high income is due to a large inheritance or to his willingness to work long hours at a dreary job?

Suppose that Italy and Switzerland both produce jeans and olives. Italy's opportunity cost of producing a crate of olives is 5 pairs of jeans while Switzerland's opportunity cost of producing a crate of olives is 10 pairs of jeans. By comparing the opportunity cost of producing olives in the two countries, you can tell that_________ has a comparative advantage in the production of olives and __________ has a comparative advantage in the production of jeans.

Italy Switzerland

Which of the following would increase in response to an increase in the price of ironing boards? A. the equilibrium price of irons B. the equilibrium quantity of irons C. the quantity of irons demanded at each possible price of irons D. None of the above is correct.

None of the above is correct.

Positive or Normative? Killing people is bad.

Normative

Positive or Normative? The government should not execute anyone, even murderers.

Normative

Ceteris paribus

One assumption that must be satisfied for a theory to be test legitimately is the _______ assumption.

What would happen to the price of soy nut butter if the price of soy went up, the price of jelly fell, fewer firms decided to produce soy nut butter, and health officials announced that soy nut butter was good for you? Kids with peanut allergies and their classmates eat soy nut butter and jelly sandwiched for lunch at school. a) Price will fall, and the effect on quantity is ambiguous b) Price will rise, and the effect on quantity is ambiguous c) Quantity will fall, and the effect on quantity is ambiguous d) Quantity will rise, and the effect on quantity is ambiguous

Price will rise, and the effect on quantity is ambiguous

ANSWERS

QUESTIONS

Which of the following statements is an example of a positive, as opposed to a normative, statement? a) Americans deserve a cleaner environment b) Economic policies should focus on improving equality c) Reducing emissions reduces days missed from school due to asthma d) All Americans are titled to quality health care

Reducing emissions reduces days missed from school due to asthma

Mitch, the president of a company that makes electronic devices, borrows a large sum of money from the local bank to purchase the machinery needed to produce a line of HDTVs. HDTV technology is expected to eventually make regular TVs obsolete. As depicted in the above scenario, which of the following is an example of creative destruction?

Regular TVs no longer being available because the introduction of HDTVs drove them out of the market

Movement along the demand curve for wine or a shift of the demand curve for wine? A change in tastes of consumers that makes them desire more wine

Shift

What will happen in the gasoline market now if buyers expect higher gasoline prices in the near future? A) The demand for gasoline will increase be. B) The supply of gasoline will increase. C) The demand for gasoline will decrease. D) The demand for gasoline will be unaffected

The demand for gasoline will increase be

What would happen to the equilibrium price and quantity of lattes if coffee shops began using a machine that reduced the amount of Labor necessary to produce steamed milk, which is used to make lattes, and scientists discovered that coffee prevents heart attacks? A. Both the equilibrium price and quantity would increase B. The equilibrium quantity would increase, and the effect on equilibrium price would be ambiguous. C) Both the equilibrium price and quantity would decrease. D) The equilibrium price would increase, and the effect on equilibrium quantity would be ambiguous

The equilibrium quantity would increase, and the effect on equilibrium price would

What is the inner loop and outer loop in the circular loop diagram?

The inner loop represents the flows of inputs and outputs. The outer loop represents the corresponding flow of dollars.

A Production possibilities frontier can shift outward if a) Government increases its spending b) There is a technological improvement c) Resources are shifted from the production of one good to the production of another d) The economy abandons inefficient production methods in favor of efficient production methods

There is a technological improvement

Draw and explain a production possibilities frontier for an economy that produces milk and cookies. What happens to this frontier if disease kills half of the economy's cows?

This simple example assumes: •The economy only produces two things -- milk and cookies. •Resources (for example, labor) can be used to make either milk or cookies. •Cows are used in the production of milk - but cows are NOT used in the production of cookies. Since cows are not used in the production of cookies, the maximum quantity of cookies than can be produced in this economy (if all resources are used to make cookies) would not change if half the cows died. Milk production would be affected. Cookie production would not be affected.

People in the U.S. state of Iowa eat both corn and potatoes. It is technically possible for farmers to grow both corn and potatoes in Iowa, yet almost no farmers grow potatoes. Instead, every year, Iowa exports corn and imports potatoes from the U.S. state of Idaho, where farmers specialize in potatoes. Which of the following principles of economic interaction best describes this scenario? -When markets do not achieve efficiency, government intervention can improve overall welfare. -Trade can make everyone better off. -There is a tradeoff between equity and efficiency. -All costs are opportunity costs.

Trade can make everyone better off.

An increase in the demand for bananas will NOT be caused by a) a rise in the price of apples b) buyers switching to a more healthy diet c) a drop in the market price of bananas d) news the bananas help relieve stress in people

a drop in the market price of bananas

production possibilities frontier

a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

circular-flow diagram

a visual model of the economy that shows how dollars flow through markets among households and firms

Which of the following is a positive, rather than a normative, statement?

a) Law X will reduce national income. b) Law X is a good piece of legislation. c) Congress ought to pass law X. d) The president should veto law X. Answer is A.

All of the following topics fall within the study of microeconomics EXCEPT

a)the impact of cigarette taxes on the smoking behavior of teenagers. b) the role of Microsoft's market power in the pricing of software. c) the effectiveness of antipoverty programs in reducing homelessness. d) the influence of the government budget deficit on economic growth Answer is D

Positive Statements

are descriptive. They make a claim about how the world is. data proven

Normative Statements

are prescriptive. They make a claim about how the world ought to be. more on values, morals, ethics...

Suppose that a regulation is in place that does not allow the price of a good to exceed $5. If this price is below the equilibrium point in the market, this would be an example of a a) binding price ceiling b) non-binding price ceiling c) binding price floor d) non-binding price floor

binding price ceiling

When something is fashionable, economists would say that demand would increase because a) the price of the product has increased b) consumer tastes and preferences have turned favourably towards that product c) expectations of the future price has increased d) consumer incomes have increased

consumer tastes and preferences have turned favourably towards that product

Josh mows lawns. If the demand for lawn-mowing service is elastic and Josh wants to increase his total revenue, he should a) increase the price of his lawn-mowing service b) reduce the costs of operating his lawn-mowing service c) decrease the price of his lawn-mowing service d) more than one of the above is correct

decrease the price of his lawn-mowing service

If the government removes a tax on a good, then the price paid by buyers will a) increase, and the price received by sellers will increase b) decrease, and the price received by sellers will decrease c) increase, and the price received by sellers will decrease d) decrease, and the price received by sellers will increase

decrease, and the price received by sellers will increase

Oil is used to produce gasoline. If the price of oil increases, consumer surplus in the gasoline market a) decreases b) may increase, decrease, or remain unchanged c) is unchanged d) increases

decreases

review this

http://wuxiangyue.weebly.com/blog/principles-of-economics-chapter-2-problems-and-applications

Joe and Fred are economists. Joe thinks that the wealthiest 10% of the US population should be taxed a rate higher than the rest of society because they can better afford it. Fred thinks that everyone should be taxed at the same rate because that is the fairest scenario and the wealthy should not be penalized for their success. In this example, Joe and Fred A. have different normative views about tax policy B. must both be incorrect because tax policy is never that simple. C. disagree about the validity of a positive theory D. None of the above is correct

have different normative views about tax policy

A minimum wage that is set below a market's equilibrium wage will a) result in an excess demand for labor, that is, unemployment b) result in an excess supply of labor, that is, unemployment c) result in an excess demand for labor, that is, a shortage of workers d) have no impact on employment

have no impact on employment

If a surplus exists in the pizza market, then the current price must be __________ than the equilibrium price. For the market to reach equilibrium, you would expect __________. Higher or lower? Sellers to offer lower prices, persistent excess demand, buyers to offer higher prices

higher

two type of decision makers in circular flow diagram

households and firms

Who are the buyers and sellers in the market for factors of production and the market for goods and services ?

households sell factors of production firms buy factors of production households provide the inputs that firms use to produce goods and services firms sell goods and services households buy goods and services households buy the outputs of the goods and services that firms produce

Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of tomatoes will a) increase consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles b) decrease consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles c) increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles d) decrease consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles

increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles

If the demand for donuts is elastic, then a decrease in the price of donuts will a) increase total revenue of donut sellers b) there is not enough information to answer this question c) decrease total revenue of donut sellers d) not change total revenue of donut sellers

increase total revenue of donut sellers

From the previous analysis, you can determine that as Sam increases his production of boats, his opportunity cost of producing one more boat _____

increases

The Surgeon General announces that eating apples promotes healthy teeth. As a result, the equilibrium price of apples A. increases, and producer surplus increases. B. increases, and producer surplus decreases. C. decreases, and producer surplus decreases. D. decreases, and producer surplus increases.

increases, and producer surplus increases

Land

is a shorthand expression for any resource provided by nature

Economic model

is a simplified representation of some aspect of the economy. Because including every detailed, realistic aspect of an economy would result in something that isn't tractable and informative, economists use models to learn about the world. Just as an airplane model does not include all of the interior details of a plane, an economist's model does not include every feature of the economy.

Normative

is one that offers opinion as to the way the world should be

Positive

is one that seeks to describe the world as it is

Scarcity

is the condition in which human wants are forever greater than available supply of time, goods, and resources. ______ of a particular thing means there is not enough of that item to satisfy everyone who wants it.

Entrepreneurship

is the creative ability of individuals to seek profits by taking risks and combining resources to produce innovative products. It is not a separate source but rather is a special type of the resource.

Labor

is the mental and physical capacity of workers to produce goods and services. This resource is measured by the number of workers as well as the skills and quality of workers.

Do 1,2,3,4 of problem applications of chapter 2

look at ch 2

An economy produces hot dogs and hamburgers. If a discovery of the remarkable health benefits of hot dogs were to change consumers' preferences, it would a) expand the production possibilities frontier. b) contract the production possibilities frontier. c) move the economy along the production possibilities frontier. d) move the economy inside the production possibilities frontier.

move the economy along the production possibilities frontier because the trade-off between producing hot dogs and hamburgers doesn't change, because resources remain the same. However, the consumption point along the production possibilities frontier has changed, because consumers now prefer to consume more hot dogs. This is represented by a movement along the production possibilities frontier to a point with more hot dog production and less hamburger production.

The following graph shows the production possibilities curve (also known as the production possibilities frontier) of an economy that produces cars and computers. Suppose that a rise in this economy's saving rate allows for investment in modern, efficient manufacturing plants. Adjust the production possibilities curve (PPC) to show the economy's new production possibilities after the rise in the saving rate. Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther.

move the line from the original 10, 7 to 15, 9

Suppose South Africa produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier (also known as the production possibilities curve) for barley, an agricultural good, and industrial robots, a capital good. Drag the production possibilities frontier (PPF) on the graph to show the effects of a long drought that reduces the amount of water available for farmers to use for irrigation. Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther.

move the line from the original 150, 240 to 150, 160.

As a result of a decrease in price, A. new buyers enter the market, decreasing consumer surplus. B. new buyers enter the market, increasing consumer surplus. C. existing buyers exit the market, increasing consumer surplus. D. existing buyers exit the market, decreasing consumer surplus.

new buyers enter the market, increasing consumer surplus.

Suppose that a regulation is in place that does not allow the price of a good to exceed $5. If this price is above the equilibrium point in the market, this would be an example of a a) binding price ceiling b) non-binding price ceiling c) binding price floor d) non-binding price floor

non-binding price ceiling

In a competitive market free of government regulation, A. price adjusts until quantity demanded equals quantity supplied. B. price adjusts until quantity demanded is less than quantity supplied. C. supply adjusts to meet demand at every price. D. price adjusts until quantity demanded is greater than quantity supplied.

price adjusts until quantity demanded equals quantity supplied

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy a. a producer surplus increases and total surplus increases in the market for that good b. producer surplus increases and total surplus decreases in the market for that good c. producer surplus increases and total surplus decreases in the market for that good d. producer surplus decreases and total surplus increases in the market for that good

producer surplus increases and total surplus decreases in the market for that good

When the price of a good increases, the a) quantity demanded of the good will increase b) quanity demanded of the good will decrease c) demand for the good will decrease d) demand for the good will increase

quantity demanded of the good will decrease

If a price floor is in place and it is not binding, the market will a) remain in equilibrium, unaffected b( the price floor b) experience a shortage c) experience a surplus d) adjust the equilibrium price until it is equal to the price floor

remain in equilibrium, unaffected b( the price floor

Assume that Juanita takes opportunity costs and the price of the suit into consideration when she shops. Juanita will minimize the cost of the suit if she buys it from the

store in the neighboring city

In monopolistically competitive markets, economic losses a. suggest that some existing firms will exit the market b. are never possible c. suggest that new firms will enter the market d. are minimized through government-imposed barriers to entry

suggest that some existing firms will exit the market

If sellers do not adjust their quantities supplied at all in response to a change in price, a) supply is perfectly inelastic b) advances in technology must be prevalent c) the time period under consideration must be prevalent d) supply is perfectly elastic

supply is perfectly inelastic

If a tax is imposed on sellers of a good, the __________ curve of the good will shift __________ by the amount of the tax. a) demand, up b) demand, down c) supply, up d) supply, down

supply, up

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm experience zero economic profit? a. monopoly only b. monopoly, monopolistic competition, and perfect competition c. monopoly and monopolistic competition d. the answer cannot be determined without knowing whether the market is in the long run or short run

the answer cannot be determined without knowing whether the market is in the long run or short run

Suppose the gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over the next few months less on the weekends to try to save money. Within the year, she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of a) the availability of substitutes in determining the price elasticity of demand b) a necessity versus a luxury in determining the price elasticity of demand c) the time horizon in determining the price elasticity of demand d) The definition of a market in determining the price elasticity of demand

the time horizon in determining the price elasticity of demand

One of the three basic questions an economy has to face is _____ goods and services will be produced.

which

Ceteris paribus

"All other things remain unchanged" is a key simplifying assumption that must be satisfied for a theory to be tested legitimately. This assumption allows concentration on the relationship between key variables without unnecessary complication of the model.

Jared and Latasha are partners at a management consulting firm. They are trying to determine which of them has a comparative advantage in creating the 50 slides required for a sales pitch to a prospective client. Jared can create 15 slides per hour. For other activities, he can bill clients $750 per hour. Jared's opportunity cost of creating slides is ____ per slide.

$ 50.00

Eleanor needs a new roof. She finds Kevin, a roofing contractor, through an ad he posted in the local newspaper. Kevin paid $70 to post the ad in the newspaper. After Eleanor and Kevin agree on the price for the new roof, they sign a contract, which Eleanor has a law firm write up for $115, stating that Kevin will install Eleanor's new roof for $2,400. The transaction costs associated with this exchange are

$185

You work as an assistant coach on the university swim team and earn $12 per hour. One day, you decide to skip the hour-long practice and, instead, go to the local carnival, which has an admission fee of $10. The total cost (valued in dollars) of skipping practice and going to the carnival (including the opportunity cost of time) is

$22

You work as an assistant coach on the university basketball team and earn $14 per hour. One day, you decide to skip the hour-long practice and, instead, go to the local carnival, which has an admission fee of $9. The total cost (valued in dollars) of skipping practice and going to the carnival (including the opportunity cost of time) is__________.

$23

Suppose a tax of $4 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units. The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400. The deadweight loss of the tax is A. $200. B. $600. C. $1,200. D. $400.

$600

Which of the following markets impose deadweight losses on society? (i) perfect competition (ii) monopolistic competition (iii) monopoly a. (i) and (ii) only b. (i) only c. (ii) and (iii) only d. (i) and (iii) only

(ii) and (iii) only

*A)* The mojito Frances receives *C)* The $350 per week Dmitri earns working for Little Havana

*Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or outputs. Check all that apply.* *A)* The mojito Frances receives *B)* Frances's labor *C)* The $350 per week Dmitri earns working for Little Havana *D)* The $175 Dmitri spends to purchase software from PC Pros

Which of the elements of this scenario represent a flow from a household to a firm? This could be a flow of dollars, inputs, or outputs. Check all that apply.

- The $200 Jake spends to purchase air travel to Hawaii from Flyaway Airlines -Latasha's labor

When the local used bookstore prices economics books at $15 each, it generally sells 70 books per month. If it lowers the price to $7, sales increase to 90 books per month. Given this information, we know that the price elasticity of demand for economics books is a) 0.34, and an increase in price from $7 to $15 results in an increase in total revenue b) 0.34, and an increase in price from $7 to $15 results in a decrease in total revenue c) 2.91, and an increase in price from $7 to $15 results in a decrease in total revenue d) 2.91, and an increase in price from $7 to $15 results in an increase in total revenue

0.34, and an increase in price from $7 to $15 results in an increase in total revenue

As price rises from $5 to $6, the price elasticity of demand using the midpoint method is approximately a) 0.07 b) 2.45 c) 0.18 d) 0.41

0.41

Last year, Carolyn bought 6 pairs of earrings when her income was $40,000. This year, her income is $52,000, and she purchased 7 pairs of earrings. Holding other factors constant, it follows that Carolyn's income elasticity of demand is about a) 0.59, and Carolyn regards earrings as an inferior good b) 1.7, and Carolyn regards earrings as an inferior good c) 0.59, and Carolyn regards earrings as a normal good d) 1.7, and Carolyn regard earrings as a normal good

0.59, and Carolyn regards earrings as a normal good

Determine whether each of the following topics would more likely be studied in microeconomics or macroeconomics. 1. The optimal interest rate for the Federal Reserve to target 2. The effects of government tax policy on long-term economic growth 3. The effect of a cigarette tax on the quantity of cigarettes sold

1. Macro 2. Macro 3. Micro

Categorize each of them as positive or normative. 1. Killing people is bad. 2. By executing convicted murderers, the government may deter potential murderers and, therefore, decrease the murder rate. 3. It is immoral for the government to kill people. 4. The government should not execute anyone, even murderers.

1. Normative 2. Positive 3. Normative 4. Normative

Identify whether each of the following events in this scenario occurs in the resource market (the market for factors of production) or the product market (the market for goods and services). 1. Becky earns $600 per week working for the Medical Clinic. 2. Alex spends $175 to purchase medical services from the Medical Clinic. 3.Alex earns $475 per week working for Little Havana.

1. Resource Market 2. Product Market 3. Resource Market

Melvin's Magnets earned $200 in total revenue last month when it sold 100 souvenir magnets. This month it earned $300 in total revenue when it sold 60 souvenir magnets. The price elasticity of demand for Marvin's magnets is a) 1.71 b) 1.25 c) 0.27 d) 0.58

1.25

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing o supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about a) 0.45 b) 2.20 c) 1.11 d) 0.90

2.20

Suppose Tim is currently using combination D, producing one truck per day. His opportunity cost of producing a second truck per day is ____ balls Correct per day.

3 Balls

Now, suppose Tim is currently using combination C, producing two trucks per day. His opportunity cost of producing a third truck per day is ____ balls Correct per day.

4 Balls

Now, suppose Sam is currently using combination C, producing two boats per day. His opportunity cost of producing a third boat per day is _____ per day.

6 kites

Labor

A corn farmer in Montana uses knowledge gathered from the agricultural training program at the local university to improve his ability to produce corn. Because it represents a human input to production, education and training are examples of investment in..

efficient and non efficient

An outcome is said to be efficient if the economy is getting all it can from the scarce resources it has available. Points on the production possibilities frontier represent efficient levels of production. Points on the inside of the ppf are non efficient.

Implicit Cost or Explicit Cost? The wholesale cost for the guitars that Bob pays the manufacturer

Explicit Cost

Suppose Latasha earns $625 per week working as work as a flight attendant for Flyaway Airlines. She uses $8 to buy a box of aspirin at Pillmart Pharmacy. Pillmart Pharmacy pays Jake $325 per week to work the cash register. Jake uses $200 to purchase air travel to Hawaii from Flyaway Airlines.

Factor Market: -Jake earns $325 per week working for Pillmart Pharmacy. Product Market: -Jake spends $200 to purchase air travel to Hawaii from Flyaway Airlines. -Latasha spends $8 to buy a box of aspirin.

Economists make use of assumptions, some of which are unrealistic, for the purpose of a) Teaching economics to people who have never before studied economics b) Advancing their political agendas c) Developing models when the scientific method cannot be used d) Focusing their thinking on what actually matters

Focusing heir thinking on what actually matters

example of differences in scientific judgement in economics

For example, economists disagree about whether the government should tax a household's income or its consumption (spending). Advocates of a switch from the current income tax to a consumption tax believe that the change would encourage households to save more because income that is saved would not be taxed. Higher saving, in turn, would free resources for capital accumulation, leading to more rapid growth in productivity and living standards. Advocates of the current income tax system believe that household saving would not respond much to a change in the tax laws. These two groups of economists hold different normative views about the tax system because they have different positive views about saving's responsiveness to tax incentives.

Because he can now make more trucks per hour, Tim's opportunity cost of producing balls is ____ than Correct it was previously.

Higher than

How does technological advancement affect PPF? A technological advance in the computer industry enables the economy to produce more computers for any given number of cars. As a result, the production possibilities frontier shifts outward. If the economy moves from point A to point G, then the production of both cars and computers increases.

If there is a technological advancement in the production of the good/service, the curve pushed outward on the same axis. look at ch 2 ppf section notice that since the technological advancement was in the computer industry, the ppf move outward and the y intercept which represent the amount of computer produced if there are no cars is higher but the x intercept which represent the amount of cars produced when there are no computers stay the same.

Implicit Cost or Explicit Cost? The rental income Bob could receive if he chose to rent out his showroom

Implicit Cost

Implicit Cost or Explicit Cost? The salary Bob could earn if he worked as a paralegal

Implicit Cost

Simplifying

In order to be useful, models require ____ assumptions.

Economic models A) Are people who act out the behavior of firms and households so that economists can study the behavior be. B) Are useful to researchers but not to teachers because economic models omit many details of the real world economy. C) Are usually details replications of reality. D) Incorporate simplifying assumptions that often contradict reality, but also help at home economist better understand reality

Incorporate simplifying assumptions that often contradict reality, but also help at home economist better understand reality

From the previous analysis, you can determine that as Tim increases his production of trucks, his opportunity cost of producing one more truck _______ .

Increases

Suppose society faces a broad tradeoff between allocating resources to the production of investment goods (computers) and consumption goods (cars) before the rise in the saving rate described above. Which of the following events would be most likely to lead to the rise in the saving rate you just illustrated?

Increasing production of investment goods and decreasing production of consumption goods

Latasha's opportunity cost of creating slides is 30% lower than Jared's. However, as the senior partner, her billing rate is 25% higher. Based on all of these facts, _____ has a comparative advantage in creating slides.

Latasha

If a shortage exists in the car market, then the current price must be_______ than the equilibrium price. For the market to reach equilibrium, you would expect_______ .

Lower Buyers to offer higher prices

Microeconomics or Macroeconomics? The optimal interest rate for the Federal Reserve to target

Macroeconomics

Macro

Micro/Macro: The effect of a large government budget deficit on the economy's price level

Micro

Micro/Macro: The effect of government regulation on a monopolist's production decisions

Macro

Micro/Macro: The effect of government tax policy on long-term economic growth

Micro

Micro/Macro: The effect of the internet on the pricing of used cars

Macro

Micro/Macro: The government's optimal spending level

Micro

Micro/Marco: The effect of a cigarette tax on the quantity of cigarettes sold

Microeconomics or Macroeconomics? The effect of government regulation on a monopolist's production decisions

Microeconomics

Determine whether each of the following topics would more likely be studied in microeconomics or macroeconomics.

Microeconomics: -The effect of government regulation on a monopolist's production decisions Macroeconomics: - The optimal interest rate for the Federal Reserve to target -The government's decision on how much to spend on public projects

Movement along the demand curve for wine or a shift of the demand curve for wine? An increase in the price of wine

Movement Along

Movement along the supply curve for peanut butter or a shift of the supply curve for peanut butter? An increase in the price of peanut butter

Movement Along

Total surplus in a market will increase when the government A. imposes a tax on that market. B. imposes a binding price floor or a binding price ceiling on that market. C. Both a and b are correct. D. Neither a nor b is correct.

Neither a nor b is correct.

Positive

Positive/Normative: By executing convicted murderers, the government can deter potential murderers and decrease the murder rate.

Normative

Positive/Normative: It is immoral for the government to kill people

Normative

Positive/Normative: It is immoral for the government to redistribute money from one person to another.

Normative

Positive/Normative: Killing people is bad

Normative

Positive/Normative: Taxes are too high

Normative

Positive/Normative: The government should not execute anyone, even murderers.

Positive

Positive/Normative: When the government taxes the rich and gives more to the poor, it gives the rich an incentive to hide their earnings from the government

The following table contains statements that provide some analysis of policies that address globalization. Categorize each of these statements as either positive or normative.

Positive: -In the past decade, U.S. companies have outsourced millions of jobs overseas. -If the U.S. government were to institute higher tariffs on imports, companies would stop outsourcing jobs. Normative: -Companies that outsource jobs are acting immorally. -The U.S. government should institute higher tariffs on imports.

Used cars are inferior goods. What will happen to the price of used cars if the price of new cars fell and consumer income increased? a) Price will rise b) Price will fall c) Price will stay the same d) The price change will be ambiguous

Price will fall

Economic model-building process

Problem identification -> Model development -> Testing a theory

Which of the following events could shift the demand curve for gasoline to the left? A. The income of gasoline buyers rises, and gasoline is a normal good B. The price of gasoline rises. C. The income of gasoline buyers falls, and gasoline is an inferior good D. Public service announcements run on television and courage people to walk or ride bicycles instead of driving cars

Public service announcements run on television and courage people to walk or ride bicycles instead of driving cars

Suppose Germany produces only cars and trucks. The resources that are used in the production of these two goods are not specialized—that is, the same set of resources is equally useful in producing both trucks and cars. The shape of Germany's production possibilities frontier (PPF) should reflect the fact that as Germany produces more trucks and fewer cars, the opportunity cost of producing each additional truck ________ . How would the graph look?

Remains Constant A straight line

Despite their differences, with which proposition are two economists chosen at random most likely to agree?

Rent ceilings reduce the quantity and quality of available housing.

Movement along the demand curve for wine or a shift of the demand curve for wine? An increase in the price of beer (a substitute for wine)

Shift

Movement along the supply curve for peanut butter or a shift of the supply curve for peanut butter? A decrease in the number of producers

Shift

Movement along the supply curve for peanut butter or a shift of the supply curve for peanut butter? An increase in the price of labor (used in the production of peanut butter)

Shift

Juanita makes $18 an hour at work. She has to take time off work to purchase her suit, so each hour away from work costs her $18 in lost income. Assume that returning to work takes Juanita the same amount of time as getting to a store and that it takes her 30 minutes to shop. As you answer the following questions, ignore the cost of gasoline and depreciation of her car when traveling.

Store Opportunity Cost of Time Price of a Suit Total Cost (Dollars) (Dollars per suit) (Dollars) Local Department Store 18.00 102 120.00 Across Town 27.00 88 115.00 Neighboring City 45.00 63 108.00

The market for diamond rings is closely linked to the market for high-quality diamonds. If a large quantity of high-quality diamonds and turns the market, then the A. Supply curve for diamond rings will shift right, which will create a shortage of the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity B. Demand curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity C. Supply curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease which will increase quantity demanded and decrease quantity supplied. Then you market equilibrium will be at a lower price and higher quantity D. Demand curve for diamond rings with shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity

Supply curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease which will increase quantity demanded and decrease quantity supplied. Then you market equilibrium will be at a lower price and higher quantity

*A)* Product Market *B)* Resource Market *C)* Product Market

Suppose Frances earns $550 per week working as a programmer for PC Pros. She uses $9 to order a mojito cocktail at Little Havana. Little Havana pays Dmitri $350 per week to wait tables. Dmitri uses $175 to purchase software from PC Pros. *Identify whether each of the following events in this scenario occurs in the resource market or the product market.* *A)* Dmitri spends $175 to purchase software from PC Pros *B)* Frances earns $550 per week working for PC Pros *C)* Frances spends $9 to order a mojito cocktail

False

Suppose that hypothetical country of Paddyland has a chronic scarcity of its staple grain, rice. T/F: People in Paddyland must be poor.

True

Suppose that the hypothetical country of Andesland has a chronic scarcity of its staple grain, quinoa. T/F: There is less quinoa available than residents of Andesland would like.

Despite their differences, with which propositions are two economists chosen at random most likely to agree?

Tariffs and import quotas generally reduce economic welfare. (93%)

feasible and non feasible

The economy can produce any combination on or inside the frontier which are the feasible points. Points outside the frontier are not feasible given the economy's resources.

Which of the following statements is tr!e for a perfectly competitive firm? a. The marginal revenue and the average revenue are equal to the price b. the marginal revenue is greater than the average revenue c. the marginal revenue is greater than the total revenue d. the total revenue is greater than the average revenue

The marginal revenue and the average revenue are equal to the price

outer loop of circular flow diagram

The outer loop of the diagram represents the corresponding flow of dollars. The households spend money to buy goods and services from the firms. The firms use some of the revenue from these sales to pay for the factors of production, such as the wages of their workers. What's left is the profit of the firm owners, who themselves are members of households.

Suppose that Hubert, an economist from a research institute in Texas, and Kate, an economist from a school of industrial relations, are arguing over saving incentives. The following dialogue shows an excerpt from their debate: Kate: I think it's safe to say that, in general, the savings rate of households in today's economy is much lower than it really needs to be to sustain the improvement of living standards. Hubert: I think a switch from the income tax to a consumption tax would bring growth in living standards. Kate: You really think households would change their saving behavior enough in response to this to make a difference? Because I don't.

There are two main reasons that economists tend to disagree: a difference in values and a difference in scientific judgments. In this case, the economists are in disagreement due to differences in scientific judgments because they disagree on the responsiveness of saving rates to changes in tax regimes. In contrast, differences in values are due to disparate beliefs on value judgments, such as fairness or equity.

An economic model is

a. a mechanical machine that replicates the functioning of the economy. b. a fully detailed, realistic description of the economy c. a simplified representation of some aspect of the economy. d. a computer program that predicts the future of the economy. Answer is C

A point inside the production possibilities frontier is

a. efficient, but not feasible. b. feasible, but not efficient. c. both efficient and feasible. d. neither efficient nor feasible.

The circular-flow diagram illustrates that, in markets for the factors of production,

a. households are sellers, and firms are buyers. b. households are buyers, and firms are sellers. c. households and firms are both buyers. d. households and firms are both sellers. Answer is A

Suppose the Netherlands produces only two goods: corn and DVDs. The following graph shows the Netherlands's current production possibilities frontier (also known as the production possibilities curve), along with six output combinations represented by black points (plus symbols) labeled A to F. Complete the following table by indicating whether each point represents output combinations that are inefficient, efficient, feasible, or infeasible. Check all that apply.

a. infeasible b. infeasible c. inefficient, feasible d. inefficient, feasible e. efficient, feasible f. efficient, feasible

Suppose South Africa produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier (also known as the production possibilities curve) for corn, an agricultural good, and construction vehicles, a capital good. Drag the production possibilities frontier (PPF) on the graph to show the effects of a technological advance in medicine that allows workers to live longer and have extended careers. (compare to the car and computer example notice that here the technology advancement in medicine is outside source of both production in x and y which is why both x-int and y-int expand unlike the other example where it was just y-int because of the direct impact technology advancement had on y value

because of the advance in medicine, more labor is available for the production of both corn and construction vehicles. For instance, when you look at the vertical axis, you see that if South Africa produces zero bushels of corn, it can initially produce a maximum of 180,000 construction vehicles per year. Because the advance in medicine increases the number of construction vehicles South Africa can produce, you should have moved the point to 240,000 construction vehicles per year. Similarly, when you look at the horizontal axis, you see that if South Africa produces zero construction vehicles, it can initially produce a maximum of 30 million bushels of corn per year. Because the advance in medicine increases the amount of corn South Africa can produce, you should have moved the point to 40 million bushels of corn per year.

Suppose that a regulation is in place that does not allow the price of a good to fall below $10. If this price is above the equilibrium point in the market, this would be an example of a a) binding price ceiling b) non-binding price ceiling c) binding price floor d) non-binding price floor

binding price floor

Which of the following statements is not correct? a. both monopolistically competitive and perfectly competitive firms can earn economic profits in the short run b. only competitive firms produce the welfare-maximizing level of output c. both monopolies and monopolistically competitive firms can earn economic profits in the short run d. firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost

both monopolies and monopolistically competitive firms can earn economic profits in the short run

The demand for salt is inelastic, and the supply of salt is elastic. The demand for caviar is elastic, and the supply of caviar is inelastic. Suppose that a tax of $1 per pound is levied on the seller of salt, and a tax of $1 per pound is levied on the buys of caviar. We would expect that most of the budren of these axes will fall on a) sellers of salt and the buyers of caviar b) buyers of salt and the buyers of caviar c) sellers of salt and the sellers of caviar d) buyers of salt and the sellers of caviar

buyers of salt and the sellers of caviar

Which of the following pairs of goods would be an example of substitutes a) Computers and printers b) Petrol and cars c) Cooking Oil and gold balls d) Lamb and beef

c.Lamb and beef

Firm in a monopolistically competitive market a. are price takers b. cannot earn economic profits in the long run c. produce an output level that minimizes average total cost d. maximize profits by producing where price equals marginal cost

cannot earn economic profits in the long run

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, the a. average revenue exceeds marginal cost b. decreasing output would increase the firm's profit c. the firm is earning a positive profit d. all of the above are correct

decreasing output would increase the firm's profit

The discovery of a new hybrid wheat would increase the supply of wheat. As a result, wheat farmers would realize an increase in total revenue if the A. demand for wheat is inelastic. B. supply of wheat is elastic. C. demand for wheat is elastic. D. supply of wheat is inelastic.

demand for wheat is elastic

If a tax is imposed on a good and the incidence of the tax ends up falling more heavily on the buyers than on the sellers, we can tell that a) demand is more elastic than supply for that good b) demand is less elastic than supply for that good c) the tax was imposed on the buyers of the good d) the tax was imposed on the sellers of the good

demand is less elastic than supply for that good

If a tax is imposed on a good and the incidence of the tax ends up falling more heavily on the sellers than on the buyers, we can tell that a) demand is more elastic than supply for that good b) demand is less elastic than supply for that good c) the tax was imposed on the buyers of the good d) the tax was imposed on the sellers of the good

demand is more elastic than supply for that good

If a tax is imposed on buyers of a good, the __________ curve of the good will shift __________ by the amount of the tax. a) demand, up b) demand, down c) supply, up d) supply, down

demand, down

factors of production

describe the inputs that are used in the production of goods or services in the attempt to make an economic profit. The factors of production include land, labor, capital and entrepreneurship.

Eleanor: I think it's safe to say that, in general, the savings rate of households in today's economy is much lower than it really needs to be to sustain the improvement of living standards. Darnell: I think a switch from the income tax to a consumption tax would bring growth in living standards. Eleanor: You really think households would change their saving behavior enough in response to this to make a difference? Because I don't. The disagreement between these economists is most likely due to a) differences in scientific judgments b) differences in values c) differences in perception versus reality Despite their differences, with which proposition are two economists chosen at random most likely to agree? a) Minimum wage laws do more to harm low-skilled workers than help them. b) Tariffs and import quotas generally reduce economic welfare. c) Lawyers make up an excessive percentage of elected officials.

differences in scientific judgments

Juanita: Thanks to recent financial crises, the concept of bailouts is a hot topic for debate among everyone these days. Gilberto: Indeed, it's gotten crazy! A government bailout of severely distressed financial firms is unnecessary because free markets will properly price assets. Juanita: I don't know about that. Without a bailout of severely distressed financial firms, the economy will experience a deep recession. The disagreement between these economists is most likely due to a) differences in scientific judgments b) differences in values c) differences in perception versus reality Despite their differences, with which proposition are two economists chosen at random most likely to agree? a) Business managers can raise profit more easily by reducing costs than by raising revenue. b) Employers should not be restricted from outsourcing work to foreign nations. c) Central banks should focus more on maintaining low unemployment than on maintaining low inflation.

differences in scientific judgments

Eleanor: A popular topic for debate among politicians as well as economists is the idea of providing government assistance for health benefits. Darnell: I think it is oppressive for the government to tax people who take care of themselves in order to pay for health insurance for those who are obese. Eleanor: I disagree. I think government funding of health insurance is useful to ensure basic fairness. The disagreement between these economists is most likely due to a) differences in scientific judgments b) differences in values c) differences in perception versus reality Despite their differences, with which proposition are two economists chosen at random most likely to agree? a) Having a single income tax rate would improve economic performance. b) Immigrants receive more in government benefits than they contribute in taxes. c) Rent ceilings reduce the quantity and quality of available housing.

differences in values

A tax imposed on the sellers of a good will lower the A. price paid by buyers and raise the equilibrium quantity. B. effective price received by sellers and lower the equilibrium quantity. C. effective price received by sellers and raise the equilibrium quantity. D. price paid by buyers and lower the equilibrium quantity.

effective price received by sellers and lower the equilibrium quantity

True or False: Under market organization, individuals can communicate their preferences to other decision makers directly, through communication, but not indirectly, through their choice of whom to transact with.

false

Because he can now make more boats per hour, Sam's opportunity cost of producing kites is _____ it was previously.

higher than

When entrepreneurs bring a new product to market or use a new production method, they are _____

innovating

Microeconomics

is the study of how households and firms make decisions and how they interact in specific markets.

Microeconomics

is the study of how individuals and firms make decisions and how they interact in markets. Therefore, ___________ are more likely to create models that analyze the decisions firms (such as pricing) and consumers (such as shopping choices), as well as how government policies affect those decisions.

Macroeconomics

is the study of matters affecting the entire economy. There, ____________ are more likely to create models that analyze the policy decisions of government and central banks, as well as how these decisions affect growth, inflation, and unemployment.

Purpose of a model

is to create simplifying abstraction of reality in order to understand complex events. Complicating a model too much makes it of little use for this purpose.

A monopolist produces a. more than the socially efficient quantity of output but at a higher price than in a competitive market b. possibly more or possibly less than the socially efficient quantity of output, but definitely at a higher price than in a competitive market c. less than the socially efficient quantity of output but at a higher price than in a competitive market d. the socially efficient quantity of output but at a higher price than in a competitive market

less than the socially efficient quantity of output but at a higher price than in a competitive market

Economies of scale occur when __________ as the quantity of output increases. a. short-run average total cost falls b. short-run average total cost rises c. long-run average total cost falls d. long-run average total cost rises

long-run average total cost falls

If a shortage exists in the car market, then the current price must be __________ than the equilibrium price. For the market to reach equilibrium, you would expect __________. Higher or lower? Sellers to offer lower prices, persistent excess demand, buyers to offer higher prices

lower

If firms are competitive and profit maximizing, the price of a good equals the a. marginal cost b. average total cost of production c. fixed cost of production d. total cost of production

marginal cost

A firm will maximize profits when its a. total revenue is equal to its total cost b. marginal revenue is equal to its marginal cost c. difference between marginal revenue and marginal cost is the greatest d. total cost is greater than total revenue

marginal revenue is equal to its marginal cost

resource market

market for factor of production and resource market are used interchangeably

two types of markets in circular- flow diagram

market for factors of production market for goods and services

Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect A. most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. B. the distribution of the tax burden between buyers and sellers of cigarettes to depend on whether buyers or sellers of cigarettes are required to pay the tax to the government. C. most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. D. a large percentage of smokers to quit smoking in response to the tax.

most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government

Total revenue a) always increases as price increases b) remains unchanged as price increases when demand is unit elastic c) increases as price increases, as long as demand is elastic d) decreases as price increases, as long as demand is inelastic

remains unchanged as price increases when demand is unit elastic

The demand for big screen TVs would fall if big screen TVs are normals goods and a) there is a larger output of big screen TVs b) the market price of big screen television sets increases c) the market price of DVDs falls d) the incomes of buyers of big screen TVs fall because of a recession

the incomes of buyers of big screen TVs fall because of a recession

The law of demand states that holding everything else constant a) buyers decrease the amount of a good bought when there is more in the market b) there is an inverse or downward sloping relationship between price and quantity c) there is a positive or upward sloping relationship between price and quantity d) buyers increase the quantities they buy when their incomes increase

there is an inverse or downward sloping relationship between price and quantity