Econ 110

41) If the demand curve for a product is vertical, any tax increase on the product is paid for entirely by the consumer.

True

42) Chips and salsa are complements. If the price of salsa decreases, the demand for chips will increase.

True

9) Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced

a. a decrease in supply.

8) Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve shifts more than the supply curve. As a result

a. both the equilibrium price and quantity of MP3 players will increase.

15) Which of the following generates productive efficiency?

a. competition among sellers

25) Refer to Figure above. What is the value of consumer surplus after the imposition of the ceiling?

b. $230,000

22) An inward shift of a nation's production possibilities frontier can occur due to

b. a natural disaster like a hurricane or bad earthquake.

5) The ________ demonstrates the roles played by households and firms in the market system.

b. circular flow model

11) In economics, choices must be made because we live in a world of

b. scarcity.

12) Who receives the most of what is produced in a market economy?

b. those who are willing and able to buy them

6) Refer to Figure above. If the economy is currently producing at point Y, what is the opportunity cost of moving to point W?

b. zero

10) ________ is maximized in a competitive market when marginal benefit equals marginal cost.

c. Economic surplus

19) Lucinda buys a new GPS system for $250. She receives consumer surplus of $75 from the purchase. How much does Lucinda value her GPS system?

d. $325

13) "An Inquiry into the Nature and Causes of the Wealth of Nations" published in 1776 was written by

d. Adam Smith.

4) Refer to Figure above. If the current market price is $10, the market will achieve equilibrium by

d. a price increase, increasing the quantity supplied and decreasing the quantity demanded.

3) In a city with rent-controlled apartments, all of the following are true except

d. landlords have an incentive to rent more apartments than they would without rent control

20) If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

d. linear

21) Economists reason that the optimal decision is to continue any activity up to the point where the

d. marginal benefit equals the marginal cost.

18) To affect the market outcome, a price ceiling

d. must be set below the equilibrium price.

31) Refer to Figure above. At a price of $15, the quantity bought

A) is 2 units.

38) Marginal cost is

D) the additional cost to a firm of producing one more unit of a good or service.

26) Allocative efficiency is achieved when firms produce goods and services

F) that consumers value most.

30) If an increase in income leads to a decrease in the demand for popcorn, then popcorn is

M) an inferior good.

14) If the price of automobiles was to increase, then

a. the demand for gasoline would decrease.

45) The division of the burden of a tax between buyers and sellers in a market is called tax allocation.

false

46) The government makes all economic decisions in a mixed economy.

false

29) Refer to Figure above. Which country has a comparative advantage in the production of cotton?

A) Indonesia

23) Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase?

A) an increase in consumer income

39) The production possibilities frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources.

B) maximum attainable

27) Refer to Table above. What is Lydia's marginal benefit if she decides to stay open for two hours instead of one hour?

C) $75

37) If more insurance companies decide to cover part of the price of voluntary laser eye surgery and more doctors decide to enter the field of laser eye surgery, what will happen in the market for laser eye surgery as a result of these two factors?

C) Demand and supply will both increase.

40) The highest valued alternative that must be given up to engage in an activity is the definition of

C) opportunity cost.

36) Specializing in the production of a good or service in which one has a comparative advantage enables a country to do all of the following except

D) produce a combination of goods that lies outside its own production possibilities frontier.

24) Consumer surplus in a market for a product would be equal to ________ if the market price was zero.

D) the area under the demand curve

44) Market equilibrium occurs where supply equals demand.

False

28) All of the following are part of an economic model except

L) opinions.

33) Society faces a trade-off in all of the following situations except

T) when some previously unemployed workers find jobs.

7) A change in all of the following variables will change the market demand for a product except

a. the price of the product.

2) Figure above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat and vegetables. Refer to Figure above. What is the opportunity cost of one pound of meat?

b. 1.3 pounds of vegetables

16) Which of the following is a positive economic statement?

b. If the price of iPhones falls, a larger quantity of iPhones will be purchased.

17) Refer to Figure above. One segment of the circular flow diagram in the figure shows the flow of labor services from market K to economic agents J. What is market K and who are economic agents J?

c. K = factor markets; J = firms

1) The income effect of a price change refers to the impact of a change in

d. the price of a good on a consumer's purchasing power.

47) On a diagram of a production possibility frontier, opportunity cost is represented by the production possibility frontier shifting outward.

false

43) An economic model is a simplified version of reality used to analyze real-world economic situations.

true

48) If the demand curve for a product is vertical, any tax increase on the product is paid for entirely by the consumer.

true

49) An increase in the quantity of a product supplied is caused by an increase in the price of the product.

true

50) Chips and salsa are complements. If the price of salsa decreases, the demand for chips will increase.

true