ECN 212

What is the difference between a "change in supply" and a "change in quantity supplied"? Graph your answer. For each of the following changes, determine whether there will be a change in quantity supplied or a change in supply. i. a change in the resource cost ii. a change in producer expectations iii. a change in price iv. a change in technology v. the number of sellers

A change in supply refers to a shift in the supply curve. A change in quantity supplied refers to a movement along a fixed supply curve.

6) The figure above shows a production possibilities frontier. In the figure, when the economy moves from point E to point D, what is the opportunity cost of a DVD? A) 0.25 cell phones B) 4 cell phones C) 0.5 cell phones D) zero E) 1 cell phone

A) 0.25 cell phones

Which of the following would cause a movement along, but no shift in the demand curve for spinach? A) Disastrous weather that destroys about half of this year's spinach crop. B) A newly discovered increase in the nutritional value of spinach. C) An increase in the price of broccoli, a substitute for spinach. D) An increase in income for all spinach lovers.

A) Disastrous weather that destroys about half of this year's spinach crop.

Which goods have more elastic demands? A) Goods with many substitutes. B) Goods whose purchase represents a small percentage of income. C) Goods with few substitutes. E) Goods which are necessities.

A) Goods with many substitutes.

Which of the following is NOT a normative economic statement? A) Teenagers are responsible for most driving fatalities. B) The price of gasoline is too high. C) People over the age of 75 should not be allowed to drive cars. D) States should reduce the tax on heating fuel oil during the winter. E) We don't spend enough money on anti-smoking campaigns.

A) Teenagers are responsible for most driving fatalities.

Because of an increase in the price of leather, the average price of a pair of women's dress shoes increased 12 percent. If the price elasticity of demand for women's dress shoes is 0.85, which of the following will happen? A) Women will decrease the number of pairs of dress shoes they demand by 10.2percent. B) Women's total expenditure on dress shoes will decrease. C) Total revenue from the sale of women's dress shoes will decrease. D) None of the above.

A) Women will decrease the number of pairs of dress shoes they demand by 10.2percent

Consider the figure above showing the market for soft drinks. Suppose the economy is at point a. A movement to point b could be the result of A) an increase in technology. B) an increase in the cost of soft drink production. C) an increase in the relative price of a soft drink. D) a decrease in the number of sellers of soft drinks.

A) an increase in technology.

The observation that the demand curve for grape jelly shifted rightward every time the price of peanut butter fell means that grape jelly and peanut butter are A) complements. B) substitutes. C) inferior goods. D) normal goods

A) complements.

If the percentage change in price is 10 percent and the demand is elastic, then the percentage change in the quantity demanded A) is larger than 10 percent. B) equals 0 percent. C) equals 10 percent. D) is greater than 0 percent but less than 10 percent. E) More information is needed to determine the magnitude of the change in the quantity demanded.

A) is larger than 10 percent.

A store remains open from 8 am to 4 p.m. each weekday. The storeowner is deciding whether to stay open an extra hour each evening. The owner's marginal benefit A) must be greater than or equal to the owner's marginal cost if the owner decides to stay open. B) is the benefit the owner receives from staying open from 8 am to 5 p.m. C) is equal to revenues minus operating costs. D) depends on the revenues the owner makes during the day

A) must be greater than or equal to the owner's marginal cost if the owner decides to stay open.

If an economy is operating at a point inside the production possibility frontier, then A) society's resources are being inefficiently utilized. B) he PPF curve will shift inward. C) society's resources are being used to produce too many consumer goods. D) economic policy must retard further growth of the economy

A) society's resources are being inefficiently utilized.

Which of the following does NOT influence the price elasticity of demand? A) the amount by which the demand curve shifts when the price of another good changes B) whether the good is a necessity or a luxury. C) the number of substitutes available to consumers D) the time period buyers have to respond to a price change E) the price of the good relative to total income

A) the amount by which the demand curve shifts when the price of another good changes

As the price of a pound of peanuts falls, A) the quantity of peanuts demanded will increase. B) the demand for peanuts will decrease. C) the demand for peanuts will increase. D) Both answers A and C are correct

A) the quantity of peanuts demanded will increase.

Throughout the 1990's, the price of four-wheel drive vehicles rose and each year more were purchased. This experience suggests that A) there must have been rightward shifts in the demand curve for four-wheel drive vehicles. B) there must have been tremendous technological advances in the way four-wheel drive vehicles are produced. C) there must have movements leftward along the supply curve of four-wheel drive vehicles. D) None of the above.

A) there must have been rightward shifts in the demand curve for four-wheel drive vehicles

The "law of demand" refers to the fact that, all other things remaining constant on the demand side of the market, when the price of a good rises A) there will be a movement up along the demand curve to a smaller quantity demanded. B) the demand curve will shift rightward. C) there will be a movement down along the demand curve to a larger quantity demanded. D) the demand curve will shift leftward

A) there will be a movement up along the demand curve to a smaller quantity demanded.

The problem of "scarcity" applies A) to all economic systems, regardless of their level of development. B) only in underdeveloped countries because there are few productive resources in these countries. C) only in economic systems that are just beginning to develop because specialized resources are scarce. D) only in industrially developed countries because resources are scarce in these countries.

A) to all economic systems, regardless of their level of development.

A hot dog vendor on a street corner wants to increase the total revenue from selling hotdogs. The price elasticity of demand for the hot dogs is 1.1. Hence the vendor will A) work harder to reduce the costs of production. B) lower the price of a hot dog. C) raise the price of a hot dog as high as possible. D) do whatever it takes to sell as many more hot dogs as possible.

B) lower the price of a hot dog

When a nation is producing on its production possibilities frontier, if more resources are used to produce one good, then the production of other goods A) must change but they might increase or decrease. B) must decrease. C) must increase. D) must remain the same. E) might increase if the nation can produce more efficiently

B) must decrease.

In the production of goods and services, tradeoffs exist because A) not all production is efficient. B) society has only a limited amount of productive resources. C) buyers and sellers often must negotiate prices. D) human wants and needs are limited at a particular point in time

B) society has only a limited amount of productive resources.

If the demand for bottled water increases and the supply of bottled water decreases, A) the equilibrium price of bottled water definitely decreases. B) the equilibrium price of bottled water definitely increases. C) the equilibrium quantity of bottled water definitely increases. D) the equilibrium quantity of bottled water definitely decreases

B) the equilibrium price of bottled water definitely increases

If the price per bushel of apples increased from $7.00 to $8.00 because of a poor harvest, A) the demand for apples decreases. B) he quantity of apples demanded decreases. C) the quantity of apples supplied decreases. D) Both answers A and B are correct.

B) the quantity of apples demanded decreases.

You have the choice of going on vacation to Florida for one week, staying at work for the week, or spending the week doing fix-up projects around your house. If you decide to go to Florida, the opportunity cost of the week is A) working, because you would be giving up dollars. B) working or doing fix-up projects, depending on which you would have done otherwise .C) working and doing fix-up projects .D) nothing because you will enjoy the trip to Florida

B) working or doing fix-up projects, depending on which you would have done otherwise

For a "change in the quantity supplied" but not "a change in supply" to occur, there must be A) a rightward shift of the supply curve. B) a rightward shift of the demand curve. C) a leftward shift of the demand curve. D) Both answers B and C are correct.

D) Both answers B and C are correct. **this is a shift of the demand curve, but we are moving along a given supply curve**

In the figure above, which of the following movements would entail the greatest opportunity cost? A) From point C to point B. B) From point C to point A. C) From point B to point A. D) From point A to point E

D) From point A to point E

You are in the business of producing and selling hamburgers, french fries, pizza, and ice cream. The mayor plans to impose a tax on one of these products. Based on the elasticities in the above table, as a profit-minded business person who seeks to avoid taxes whenever possible, which good would you most prefer to have taxed? A) Ice Cream B) French Fries C) Hamburgers D) Pizza

D) Pizza

Which of the following events would cause the price of oranges to fall? a. There is a shortage of oranges .b. An article is published in which it is claimed that tangerines cause a serious disease, and oranges and tangerines are substitutes. c. The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges. d. All of the above are correct.

c. The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges.

Lead is an important input in the production of crystal. If the price of lead decreases, other things equal, we would expect the supply of a. crystal to be unaffected .b. crystal to decrease. c. crystal to increase. d. lead to increase

crystal to increase.

Which of the following events could shift both the demand curve and the supply curve for a good? a. A technological advance pertaining to the production of the good is observed. b. Incomes of all buyers of the good increase. c. The number of sellers of the good increases. d. Everyone revises upward their expectation of next month's price of the good

d. Everyone revises upward their expectation of next month's price of the good

Suppose that a decrease in the price of good X results in fewer units of good Y being sold. This implies that X and Y are a. complementary goods .b. normal goods. c. inferior goods. d. substitute goods

d. substitute goods

Ford Motor Company announces that it will offer $3,000 rebates on new Mustangs starting next month. As a result of this information, today's demand curve for Mustangs a. shifts to the right. b. shifts to the left. c. shifts either to the right or to the left, but we cannot determine the direction of the shift from the given information. d. will not shift; rather, the demand curve for Mustangs will shift to the right next month

b. shifts to the left.

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market? a. The equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous .b. The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous. c. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. d. Both equilibrium price and equilibrium quantity would increase.

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

A dress manufacturer recently has come to expect higher prices for dresses in the near future. We would expect a. the dress manufacturer to supply more dresses now than it was supplying previously. b. the dress manufacturer to supply fewer dresses now than it was supplying previously .c. the demand for this manufacturer's dresses to fall. d. no change in the dress manufacturer's current supply; instead, future supply will be affected.

the dress manufacturer to supply fewer dresses now than it was supplying previously

7) A reason the production possibilities frontier exists is A) unlimited resources and technology. B) scarcity of resources and unlimited technology .C) scarcity of resources. D) that people's wants are unlimited. E) unemployment.

.C) scarcity of resources

The graph illustrates the market for bottled water. When the price exceeds the equilibrium price,the quantity demanded is ________ the quantity supplied and the price of the good will ________. A) equal to; fall B) less then; fall C) greater than; fall D) less than; rise E) greater than; rise

B) less then; fall

Assume that Betty and Ann live on a desert island. With a day's labor, Ann can produce 8 fish or 4 coconuts; Betty can produce 6 fish or 2 coconuts. Ann's opportunity cost of producing 1 coconut is __________ and she should specialize in the production of__________. A) 6 fish; coconuts B) 2 fish; coconuts C) 8 fish; fish D) 0 fish; coconuts

B) 2 fish; coconuts

At one point along a PPF, 10 pizzas and 7 sandwiches can be produced. At another point along the same PPF, 9 pizzas and 10 sandwiches can be produced. The opportunity cost of a pizza between these points is A) 10/7 of a sandwich. B) 3 sandwiches. C) 7/10 of a sandwich. D) 1/3 of a sandwich

B) 3 sandwiches.

Suppose consumers are expecting the price of new houses to go up in the near future. We can expect the current: A) supply of new houses to increase, causing an decrease in equilibrium price and an increase in equilibrium quantity. B) demand for new houses to increase, causing an increase in equilibrium price and equilibrium quantity. C) supply of new houses to decrease, causing an increase in equilibrium price and a decrease in equilibrium quantity. D) demand for new houses to decrease, causing a decrease in equilibrium price and equilibrium quantity

B) demand for new houses to increase, causing an increase in equilibrium price and equilibrium quantity.

If the income elasticity of demand for a good is 2, then when income rises 10 percent, the quantity demanded A) increases 2 percent .B) increases 20 percent. C) decreases 2 percent. D) decreases 20 percent. E) increases 12 percent

B) increases 20 percent.

A firm decreases the price of a product. The product has a price elasticity of demand equal to 0.3.What happens to the firm's total revenue? A) nothing B) it decreases C) it increases D) it becomes negative E) it might change but more information is needed to determine if it increases, decreases, or does not change

B) it decreases

Which of the following is a positive statement? A) An unemployment rate of 9 percent is a national disgrace. B) Unemployment is not so important a problem as inflation. C) When the national unemployment rate is 9 percent, the unemployment rate for inner-city youth is often close to 40 percent .D) Unemployment and inflation are equally important problems

C) When the national unemployment rate is 9 percent, the unemployment rate for inner-city youth is often close to 40 percent

Steel is probably the most important component in the production of bicycles. Suppose the price of steel increases. The most likely result of this in the market for bicycles will be :A) a decrease in supply, an increase in equilibrium price and equilibrium quantity. B) an increase in supply, an increase in equilibrium price and equilibrium quantity. C) a decrease in supply, an increase in equilibrium price and a decrease inequilibrium quantity. D) a decrease in supply, a decrease in equilibrium price and an increase inequilibrium quantity. E) an increase in supply, a decrease in equilibrium price and an increase inequilibrium quantity.

C) a decrease in supply, an increase in equilibrium price and a decrease inequilibrium quantity.

If peanut butter and jelly are complements their cross elasticity of demand must be A) a positive number that might be greater than 1. B) infinitely high. C) a negative number. D) a number between zero and one

C) a negative number

In the table above, Jack's comparative advantage is producing _____ and Jill's comparative advantage is producing _____. A) clothing and food; nothing B) nothing; clothing and food C) clothing; food D) food; clothing E) clothing; clothing

C) clothing; food

Candy makers accurately anticipate the increase in demand for candy for Halloween so that thesupply and demand for candy increase the same amount. As a result, the price of candy ________and the quantity ________. A) rises; increases B) falls; increases C) does not change; increases D) does not change; does not change E) rises; does not change

C) does not change; increases

If a 20 percent decrease in the price of a good leads to a 15 percent increase in the quantity demanded, then demand is ____ and total revenue will ____ as a result of the fall in price. A) inelastic; increase B) elastic; decrease C) inelastic; decrease D) elastic; increase

C) inelastic; decrease

The production possibility frontier is the boundary between those combination of goods and services that can be A) produced and those that can be consumed0 .B) consumed domestically and those that can be consumed by foreigners. C) produced and those that cannot be produced. D) consumed and those that cannot be produced.

C) produced and those that cannot be produced.

If both producers and consumers believe that a product's price will rise in the future, then at the present, the equilibrium price A) falls. B) does not change. C) rises. D) might rise, fall, or not change, but the change can never be predicted. E) might rise, fall, or not change depending on whether the effect from the producers is greater than or less than the effect from the consumers.

C) rises.

For many goods, the price elasticity of demand increases over time because A) inflation causes all prices and incomes to increase over time. B) people's incomes tend to increase over time. C) the ability to find substitutes for a good whose price has risen increases overtime. D) None of the above answers are correct.

C) the ability to find substitutes for a good whose price has risen increases overtime.

The production possibility frontier represents A) the maximum amount of labor and capital available to society. B) the maximum rate of growth of capital and labor in a country. C) the maximum levels of production that can be attained. D) combinations of goods and services among which consumers are indifferent.

C) the maximum levels of production that can be attained

In the above figure, when 2000 bicycles are made each month, we can see that A) more bicycles should be produced to reach the efficient level of output. B) the marginal benefit from another bicycle is greater than the marginal cost of another bicycle. C) the economy is very efficient at the production of bicycles because the marginal benefit exceeds the marginal cost. D) Both answers A and B are correct.

D) Both answers A and B are correct.

In the nation of Transporta, the income elasticity of demand for used cars is -2.66. Thus, when incomes in this nation increase by 10 percent A) used cars will be normal goods. B) the demand curve for used cars will shift rightward. C) 26.6 percent more used cars will be purchased. D) 26.6 percent fewer used cars will be purchased.

D) 26.6 percent fewer used cars will be purchased.

Changes in which of the following items will shift the demand curve for hamburgers? A) An increase in the price of the meat used to produce hamburgers. B) An improvement in the productivity of hamburger-making machines. C) An increase in the number of hamburger restaurants .D) A fall in the price of french fries, a complement for hamburgers.

D) A fall in the price of french fries, a complement for hamburgers.

If the price of salt increases and the quantity demanded does not change, then A) the price elasticity of demand is equal to zero. B) demand is perfectly inelastic. C) the demand curve for salt is perfectly horizontal. D) Both answers A and B are correct

D) Both answers A and B are correct

"During 2008, the higher price of gasoline led to a decrease in demand for gasoline." Holding other things constant, this statement is A) correct, because people did end up buying less gasoline during the summer of 2005. B) incorrect, because the statement implies that gasoline is a complement to automobiles. C) correct, because this really happened-it is a positive economic statement. D) incorrect, because as the price increases, the quantity demanded decreases, not the demand. E) incorrect, because the statement implies that gasoline is an inferior good.

D) incorrect, because as the price increases, the quantity demanded decreases, not the demand.

While moving along a production possibilities frontier, for the entire economy the amount of labor____, the amount of capital ____, and the level of technology ____. A) varies; varies; varies B) varies; is fixed; varies C) varies; is fixed; is fixed D) is fixed; is fixed; is fixed E) is fixed; is fixed; varies

D) is fixed; is fixed; is fixed

Scarcity can be eliminated through A) the use of market mechanisms .B) exploration that helps us find new resources. C) the practice of voluntary exchange. D) none of the above because scarcity cannot be eliminated.

D) none of the above because scarcity cannot be eliminated.

Refining gasoline for our cars requires a very specialized resource, crude oil. As a result, A) the demand for gasoline is price elastic. B) the supply of gasoline is price elastic. C) the demand for gasoline is price inelastic .D) the supply of gasoline is price inelastic

D) the supply of gasoline is price inelastic

Increasing opportunity costs suggests that A) there is no difference between inputs to a production process. B) all labor and capital are costlessly interchangeable. C) various types of resources are perfect substitutes for one another. D) various types of resources are not perfect substitutes for one another.

D) various types of resources are not perfect substitutes for one another.

Which of the following demonstrates the law of demand? a. Relative to last month, Jon buys more pretzels at $1.50 per pretzel since he got a raise at work this month. b. Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal. c. Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal. d. Kendra buys fewer Snickers at $0.60 per Snickers since the price of Milky Ways fell to $0.50 per Milky Way.

Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.

As a result of a rise in the price of beef, the prices of pork, chicken, and fish increase because A) buyers' incomes must have increased. B) people's preferences changed to favor beef because the price rise signals higher quality. C) the demand for beef fell after the price rise. D) pork, chicken, and fish are complements for beef. E) pork, chicken, and fish are substitutes for beef

E) pork, chicken, and fish are substitutes for beef

Explain. The cross elasticity of demand for substitute goods is negative and the cross elasticity of demand for complements is positive. T or F

False. The formula for the cross elasticity of demand is the percentage change in quantity demanded of good A divided by the percentage change in price of another good, B. Consider the case in which A and B are substitutes. In this case, when the price of B falls, the demand for A decreases and when the price of B rises, the demand for A increases. Since both changes in the numerator and denominator have the same sign, in either case, the result will be a positive number, that is, the cross elasticity of demand is positive. Next, consider the case in which A and B are complements. In this case, an increase in the price of B decreases the demand for A and a decrease in the price of B increases the demand for A. Here, the change in the numerator always has the opposite sign from the change in the denominator, so the resulting cross elasticity of demand will be negative

For spring break, Melanie will either stay home or go to Daytona Beach. At home, Melanie pays $10 per day for food and earns $90 a day at her job. At Daytona Beach, Melanie will stay with friends and so has no lodging cost. She will pay $20 per day for food. In terms of dollars, Melanie's opportunity cost per day of going to Daytona Beach is how much?

Melanie's opportunity cost of going to Daytona Beach is $100 per day. If she goes, she spends $10 extra for food and loses $90 income from her job, for a total opportunity cost of $100

Why is it likely that the United States has an absolute advantage in many goods and yet it still ends up importing them from other countries?

The United States might have an absolute advantage in producing a good but not a comparative advantage. In this case, the opportunity cost of producing the good in the United States is higher than in another country. Thus the United States will import the product from the other country.

Consider a market for computer software. Suppose the price of a computer falls. Simultaneously, suppose that the number of companies selling computer software decreases. How do these changes affect the market price and quantity of computer software sold?

The fall in the price of a computer increases the demand for computer software and the demand curve for computer software shifts rightward. A decrease in the number of sellers decreases the supply of computer software and the shifts the supply curve of computer software leftward. The increase in demand and decrease in supply both raise the price, so the price definitely rises. The increase in demand increases the quantity and the decrease in supply decreases the quantity. Hence the net effect on the quantity is ambiguous

Explain whether the statement, "There is life on Mars," is a normative or positive statement.

The statement is a positive statement because it does not depend on a value judgment. Instead, it is a statement that tries to describe "what is" and hence is testable. Of course, in order to test the assertion, it would be necessary to go to Mars to ascertain if there is life present. While it is difficult (!) at present to actually carry out the test, nonetheless the statement is testable and hence is a positive statement.

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today

Whatever must be given up to obtain some item it its opportunity cost. Basically, this would be a person's second choice. The opportunity cost of a person attending college is the value of the best alternative use of that person's time. For most students this would be the income the student gives up by not working. A student's opportunity cost of coming to class was the value of the best opportunity the student gave up. (For most students, that seems to be sleep.)

What will happen to the equilibrium price and quantity of traditional camera film if traditional cameras become more expensive, digital cameras become cheaper, the cost of the resources needed to manufacture traditional film falls and more firms decide to manufacture traditional film? 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 price is ambiguous. d. The effect on both price and quantity is ambiguous.

a. Price will fall and the effect on quantity is ambiguous.

If a good is normal, then an increase in income will result in a. an increase in the demand for the good. b. a decrease in the demand for the good. c. a movement down and to the right along the demand curve for the good. d. a movement up and to the left along the demand curve for the good

a. an increase in the demand for the good.

When the price of Ford pickup trucks rises from $18,000 to $19,000, the quantity of Chevy trucks demanded increases from 112,000 to 144,000. What does the cross elasticity of demand between Ford and Chevy trucks equal? What is the relationship between the two trucks?

n this case, the cross elasticity of demand = (percentage change in the quantity of Chevy trucks demanded)÷(percentage change in the price of a Ford truck). Use the midpoint method to calculate the percentages. Thus the percentage change in the quantity of Chevy trucks demanded = (144,000 - 112,000) ÷ (128,000) = 25 percent and the percentage change in the price of a Ford truck is ($19,000 - $18,000) ÷ ($18,500) = 5.4 percent. Thus the cross elasticity of demand equals (25 percent) ÷ (5.4 percent) = 4.625.