ECO2013 Andrew Tucker Quiz 1-4

Scarcity:

is faced by all individuals and societies.

Paying a salesperson more for increased sales is an example of:

an incentive.

Consumer surplus is defined as the:

gap between the demand curve and the market price.

A market exists when:

people exchange money for goods and services.

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $68, how much is consumer surplus?

$11

Which of these is NOT an example of market failure?

Competition leads firms to provide products at the lowest possible price.

Which statement is a key idea in economic thinking?

Incentives matter.

Markets tend to provide too little of products with external benefits.

True

When a scarce good or resource is consumed by the person who does not value it most, economists refer to the situation as:

a misallocation of resources.

(Figure: Predicting Demand Shifts 2) What would cause a shift from D1 to D2?

a new study that shows that honey cures cancer

(Figure: Bread and Honey) In the graph, point b represents:

a point where all of society's resources are fully employed.

(Figure: Supply and Demand for Shoes) If the price of shoes is $60, then we:

have a surplus of shoes.

(Figure: Interpreting Supply Shifts 2) A shift to the right of the supply curve could be caused by a(n):

improvement in production technology.

Supply and demand analysis is used:

in both microeconomics and macroeconomics.

The economics of uranium mining would be studied in:

microeconomics

A good example of a government-imposed price floor is:

minimum wage.

(Figure: Interpreting a Market Graph) The graph represents:

the law of supply.

Flu vaccination shots provide external benefits. Thus:

too few flu vaccination shots are given.

Because of scarcity:

we face tradeoffs in nearly every choice we make.

(Figure: Understanding Surplus and Efficiency) In the graph above, efficiency in this market is achieved at a price of:

$10.

(Table) According to the table, the equilibrium price is _____, and the equilibrium output is _____ units.

$10; 60

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $68, how much is producer surplus?

$4

(Figure: Interpreting Supply Shifts 3) When the supply shifts from S0 to S1 (a leftward shift of the supply curve), the equilibrium quantity changes from:

20 units to 15 units.

Rational behavior requires thinking at the margin. Which example represents this type of thinking?

All of these examples represent thinking at the margin.

The demand for gasoline is rising. Which statement describes a possible cause?

Consumers expect prices to rise in the near future.

Which is NOT considered a basic economic question?

How will the system accommodate change?

Which graph shows an increase in quantity supplied?

S-zero single line (a to b increases)

Investment in human capital refers to:

education, on-the-job training, and professional training activities.

In the study of economics, the goals of efficiency and equity are often:

in conflict with one another.

When quantity demanded in a market equals quantity supplied, then the:

market is in equilibrium.

In a _____ economy, individuals and firms own most resources, and in a _____ economy, the government controls most resources.

market; planned

Which type of payment would NOT be a market transaction?

payment made to a disaster victim

The opportunity costs of attending college do NOT include:

the expenditures for food.

A lawyer can argue a case in court for one hour and make $300. She could alternatively use that hour of time to type a legal brief in her office. What is the opportunity cost of her typing the legal brief?

$300, since that is the amount she could have made by arguing a case in court

Jonathan purchased coffee for $5 at Jennifer's coffee shop; however, he was willing to pay $9. Jennifer was willing to accept $3 for the coffee. The results of this transaction are a consumer surplus of:

$4 and a producer surplus of $2.

(Figure: Determining Surplus and Loss) In the graph, which price would NOT allow for an effective price floor?

$6

(Figure: Determining Surplus and Loss) In the graph, how much is deadweight loss at a price of $12?

$70

(Figure: Determining Surplus and Loss) In the graph, which price would NOT allow for an effective price floor?

$8

Paolo can walk three dogs or mow two lawns in two hours. Ashanti can walk six dogs or mow three lawns in two hours. Ashanti's opportunity cost for each additional dog walked is:

0.5 lawn mowed.

(Table) The table shows coffee and tea units produced for the United States and Japan. If Japan decides to increase production of tea from 20 units to 35 units, the opportunity cost is:

8 units of coffee.

Which situation(s) may require government intervention? I. A local business has made a profit in each of the last ten years. II. Students are having difficulty deciding whether to go the beach or to go hiking for their class trip. III. A manufacturing firm on a river is dumping production run off into the water.

III only

_____ occurs when goods and services are produced with as few resources as possible, while _____ occurs when the mix of goods and services produced is the most desired by society.

Production efficiency; allocative efficiency

Which statement is TRUE about specialization and exchange between two individuals?

They generally benefit the poorer individual as well as the richer individual.

Macroeconomics is concerned with issues such as:

Unemployment

In general terms, which item is an example of an inferior good?

a city bus

(Figure: Wheat and Autos in the United States and South Korea) According to the graph, for every extra:

car South Korea wants to produce, it must give up half a bushel of wheat.

(Figure: Interpreting Demand Curves) In the demand curve shown, an increase in price from $1 to $2 will:

cause quantity demanded to fall from 30 units to 20 units.

A production possibilities frontier that is a straight line is the result of:

constant opportunity costs.

(Figure: Determining Surplus and Loss) Consider the graph. If the price is raised from $8 to $12, consumer surplus:

decreases by $120 and deadweight loss increases by $70.

The limits on international trade include all of these EXCEPT:

decreasing opportunity costs and increasing returns.

Suppose a price floor is set on cane sugar that is approximately three times the equilibrium price. One of the effects is a(n):

drop in the quantity of sugar consumed.

Producer surplus is defined as the:

gap between the supply curve and the market price.

Which of these circumstances would NOT affect the supply of new automobiles?

higher interest rates for new car financing

(Figure: Interpreting PPF Shifts) According to the graph, which of the following changes may cause the production possibilities frontier to shift inward from PPF1 to PPF0?

increase government regulation on businesses overall

People use _____ to determine how many hours to work, and businesses use _____ to determine how much of their product they are willing to supply to the market

marginal analysis; marginal analysis

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a

model.

If the government of Spain decides to spend less on the military and more on health care, the forgone spending on military items represents the:

opportunity cost of the extra health care.

When the government chooses to use resources to build tourist centers, the selected resources are no longer available to build highways. This BEST illustrates the concept of:

opportunity cost.

Economics is BEST defined as the study of how

people make rational decisions.

"Price gouging" laws are types of _____ and often result in _____

price ceilings; shortages of a scarce good

When goods are produced at the lowest possible cost, an economy is said to have achieved:

production efficiency.

Other factors held constant, as the price of an iPad rises, the:

quantity demanded for iPads falls.

Which is NOT a source of economic growth?

reducing the level of international trade

A good example of a government imposed-price ceiling is:

rent controls.

The theory of comparative advantage says that countries:

should export those goods they can produce at a lower opportunity cost than another country.

(Figure: Bread and Honey) In the graph, a movement from point f to point g could occur if:

technological improvements occur.

Supply is defined as:

the maximum amount of a product that sellers are willing and able to provide for sale over a particular time period at various prices, holding all other relevant factors constant.

At any price below the equilibrium price:

the quantity demanded exceeds the quantity supplied in the market.

Which is an example of capital in the production process of an amusement park?

the roller coaster

The measure of society's benefits due to a market transaction is called:

total surplus.

If an economy is operating at a point that is inside of its production possibilities frontier, then it can be assumed that its resources are:

underutilized.

There are two sellers in the DVD market, Wen and Ahmed. If the market price were $5 per DVD, Wen would be willing to sell 10 DVDs and Ahmed would want to sell 15 DVDs. If the market price were to rise to $7, then:

we can confidently say that market quantity supplied is at least 25 DVDs.