ecomonic 121
In a time-series graph, time is measured on the
horizontal
The market supply curve is the sum of the individual supply curves
horizontal
The lowest amount a firm is legally allowed to pay an employee is known as the __________.
minimum wage
A change in one of the variables shown on a two variable graph causes a________. On a two variable graph, a change in one of the variables that is not shown on the graph causes a_________
movement along the curve, shift of the curve
A change in a variable measured on an axis of a graph causes a
movement along, shift in
A change in demand causes a the demand curve. A change in quantity demanded causes a the demand curve.
shift of, movement along
According to the graph, which point represents an efficient use of resources?
Point C
When is output higher than the efficient level?
When marginal benefit is less than marginal cost
Prior to the 1997 federal tobacco settlement a pack of cigarettes sold for $2.48. The terms of the settlement required a decrease in teenage smoking of 60 percent. If the elasticity of cigarette demand for teenagers is about 1.3 then the price of cigarettes should rise to __________ in order to achieve the target reduction of 60 percent.
$3.62
The previous table shows the marginal benefit that Ted earns from keeping his store open one more hour. Ted has a marginal cost of $90 per hour. How many hours should Ted stay open?
22 hours
Oprah just inherited a house with a market value of $50 comma 000, and she does not expect the market value to change. Each year, she will pay $500 for utilities and $2 comma 000 in taxes. She can earn 8 percent interest on money in a bank account. Her cost of living in the house for the year is $ 6,500. (Enter your response rounded to the nearest dollar.)
6,500
In the above graph, which of the following combinations is unattainable with the current resources available in this country?
Combination G
in the above graph, which of the following combinations of pies and cakes is unattainable given the existing resources?
Four cakes and seven pies
Refer to the previous graph. Which of the following best represents the situation in which BMW must face a trade-off between producing SUVs and producing hybrids?
Moving from point B to point C
if you double the number of workers but don't add a second vat, would you expect your output (gallons per hour) to double?
No. The principle of diminishing marginal returns applies.
How many variables are involved in explaining the movement from Point A to Point C on this graph?
One
Marlene decided to close down her retail clothing store and go back to work for a large corporation, even though she was making an accounting profit. Her decision was based on the fact that she would make more money in her old job than she was making in the retail clothing store. Marlene's decision factored in:
The opportunity cost of lost wages from keeping her store open.
According to the table of data, when do diminishing returns in the production of pizzas begin?
When the third worker is hired
An increase in the market price of MP3 players causes an increase in the production of MP3 players.
Which of the following is consistent with the law of supply?
Other things remaining equal, the law of demand says that higher prices will lead to:
a smaller quantity demanded and lower prices to a larger quantity demanded.
Market price is determined by _________.
both supply and demand
According to the law of demand, an increase in price
decrease
If there is a negative relationship between two variables, the line would slope
downward
For a nonlinear curve whose slope increases as we move to the right along the curve, we can say that the slope is increasing at
increasing
Decision analysis that involves comparing marginal costs and marginal benefits to determine the best course of action is known as:
marginal analysis.
The optimal economic decision is to continue any activity, investing or otherwise, up to the point where:
marginal benefit equals marginal cost
The is the additional cost that results from a small increase in some activity.
marginal cost
A percentage change can be calculated as
new value ---- initial value / initial value x 100
Economic variables that are calculated in current year prices are referred to as __________ variables, while variables that have been corrected to account for the effects of inflation are __________ variables.
nominal, real
All of the following scenarios depict the characteristics of substitutes except:
the price of bacon increases and the demand for eggs decreases.
All of the following scenarios depict the characteristics of complements except:
the price of coffee increases and the demand for cream increases.
A change in price causes movement along a demand curve and a change in
the quantity demanded
The principle of diminishing returns applies;
when at least one input is fixed.
The table above indicates the demand schedules for four types of consumers: A, B, C, and D and the number of consumers in each group (top row). The quantity demanded by each type of consumer (QA, QB, QC, and QD) is shown for market prices ranging from $10 down to $4. What is the combined quantity demanded at a market price of $4?
10,400
Which of the following represents an inferior good?
When consumer income increases, the demand for bologna decreases.
When is output lower than the efficient level?
When marginal benefit is greater than marginal cost
The condition that exists when quantity supplied exceeds quantity demanded at the current price is known as __________.
a surplus or excess supply
Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium:
after an adjustment period that varies.
One of the first steps in deciding whether to complete your education is to:
evaluate the marginal cost and marginal benefit of that decision.
At the market equilibrium price:
quantity demanded equals quantity supplied.
The law of ________ says there is a positive relationship between price and quantity demanded, ceteris paribus.
supply
A decrease in demand occurs when
the demand curve shifts left because a variable other than the price of the product changed.
An increase in demand occurs when
the demand curve shifts right because a variable other than the price of the product changed.
The market demand curve is
the horizontal sum of the individual demand curves.
Four years ago, the cable television company in your area increased its price by 15 percent. As a result, its total revenue increased. Last year, a new company started providing television service using satellite dishes. This year the cable company increased its price by 15 percent, but its total revenue fell. This is likely the result of which of the following?
Demand facing an individual store is generally more elastic than demand facing the entire industry. B. This year, demand for television service is elastic due to the presence of an available substitute. C. Four years ago, demand for television service was inelastic due to a lack of available substitutes. D. All of the above are correct. the answer is d all above
Consider the previous figure and assume that it is the market for health-care services. When the "baby boomer" generation retires, the number of people who require health care increases by 30%, and, as a result, the number of health-care providers also increases, but by only 25%. What is the effect on the price of health-care services over time? CORRECT ANSWER:
It increases because demand increased by more than supply.
What is the name given to the highest-valued alternative that must be given up to engage in any activity?
Opportunity cost
Which of the following is known as the highest-valued alternative that must be given up in order to engage in an activity?
Opportunity cost
Which of the following is not a possible opportunity cost of attending college?
The cost of housing
The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market?
The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.
Washington state had a bumper apple crop this year, significantly increasing the supply of apples in the U.S. Given this information, choose the statement that correctly describes the effect on the U.S. apple market.
The quantity of apples demanded will increase as the price of apples falls.
Consider a hilly neighborhood where large trees provide shade but also block views. When a resident announces plans to cut down several trees to improve her view, her neighbors object and announce plans to block the tree cutting. One week later, the trees are gone, but everyone is happy. Use the principle of voluntary exchange to explain what could have happened.
The resident bought her neighbors seedlings to plant in their yards. B. The resident paid for a block party for her neighbors. C. The resident paid her neighbors to let her cut down the trees. D. All of the above.
The graph above shows the market for laptop computers. Suppose the price of memory chips used in laptop computers decreases. How will this event impact on the equilibrium quantity and the market price?
The supply increases, causing the equilibrium quantity to rise and the market price to fall.
Assume there are three variables involved in the previous graph: (1) price, (2) quantity, and (3) a third variable. Which of these variables cause a move from Point C to Point D in the graph?
The third variable
if you double the number of workers and various ingredients and add a second vat, would you expect your output (gallons per hour) to double?
Yes. The principle of diminishing marginal returns does not apply.
The outward shift of the production possibilities frontier from point A to point B in the above graph would most likely be caused by:
a technological advance that affects both the production of automobiles and aircraft carriers
All of the following will decrease the supply of airline flights except:
a technological change that makes airplanes safer and more fuel-efficient.
When there is a nonlinear relationship between two variables, the slope will
change as we move along the curve
The line (demand curve) shifts to the right due to a:
change in a third variable other than price or quantity of pizza
On the diagram shown above, a movement from A to B represents a:
change in quantity supplied.
According to the law of supply, a decrease in a good's price
decrease
If your nominal wages increased by 10% and inflation was 15%, your real wage;
decreased
Suppose that over a one-year period, the nominal wage increases by 1 percent and consumer prices increase by 7 percent. The real wage
decreased, 6%
Upper A decrease in the market interest rate the economic cost of holding a $500 collectible for a year.
decreases
Upper A decrease in the wage for high-school graduates the opportunity cost of college
decreases
The law of ________ says there is a negative relationship between price and quantity demanded, ceteris paribus.
demand
As you increase your work time, your income increases, so there is a positive relationship between the two variables. Some people refer to this as ▼ a direct an inverse relationship. There is a negative relationship between the amount of time you work and the time you have available for other activities such as recreation, study, and sleep. Some people refer to this as an relationship.
direct, inverse
When demand is , an increase in price decreases total revenue. When demand is , a decrease in price decreases total revenue. When demand is , total revenue does not vary with price.
elastic, inelatic, unit elastic
The individual supply curve is positively sloped because a higher price
encourages a firm to increase its output by purchasing more materials and hiring more workers.
When using the marginal principle to analyze emissions standards, the government should make the emissions standard stricter as long as the
savings in health-care costs and recovered work time exceeds the cost of additional equipment and extra fuel used.
The principle of opportunity cost evolves from the concept of:
scarcity
In the previous diagram, when supply decreases, a __________ develops at the original price. Equilibrium price will __________ and equilibrium quantity will __________ as a new equilibrium is established.
shortage; rise; fall
he conditions under which an increase in demand will cause a relatively small increase in price are:
small increase in demand; highly elastic demand; highly elastic supply.
According to this graph the existence of a minimum wage in the market for low-skilled workers results in a:
surplus of workers
In the previous diagram when the price is $65 per player, there is a _________ of _________ million players per month.
surplus; 40
Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then:
the equilibrium price and quantity both increase.
Given linear demand curves, if demand and supply increase by identical amounts, then:
the equilibrium price stays the same and the equilibrium quantity rises.
Given linear demand curves, if demand increases and supply decreases, then __________.
the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous
The market supply curve is
the horizontal sum of the individual supply curves.
The market supply curve is positively sloped because a higher price
will encourage firms with higher costs to enter the market.
A heart surgeon is skillful at unplugging arteries and rerouting the flow of blood, and these skills also make her a very skillful plumber. She can clear a clogged drain in 6 minutes, about 10 times faster than the most skillful plumber in town. Suppose the surgeon earns $25 per minute in heart surgery and the best plumber in town charges $100 per hour. a. Should the surgeon clear her own clogged drains?
No, her opportunity cost is too high.
A shift of the demand curve, also called a change in
demand, will occur when a variable other than the price of the product changes.
