Econ Exam

Rent controls are a typical example of a price ceiling. Please select all likely consequences of rent controls when the price ceiling is binding -reductions in apartment quality -black markets -inefficient allocation of apartments -more subletting of apartments

All of the above

Which of the following is the best definition of the opportunity cost of a decision?

Benefits from the best foregone alternative.

Stone and brick are substitutes in home construction. Consider the market for bricks depicted in the graph. Suppose the price of stone increases due to new regulations for the stone quarrying industry. Illustrate the impact this will have on the market for bricks. Equilibrium price will... Equilibrium quantity will...

Equilibrium price- Increase Equilibrium quantity-Decrease

The U.S. government has subsidized ethanol production since 1978. With the advent of affordable electric cars, policymakers are considering whether to allow the subsidy to expire. The accompanying graph represents the market for ethanol. Move the supply and/or demand curves to show how reducing the subsidy will affect the ethanol market.

Equilibrium price- Increase Equilibrium quantity-Decrease

Organizes resources in order to produce goods and services

Firms

Brings buyers and sellers together to carry out mutually beneficial exchanges

Markets

You and other college students are deciding whether to major in music or engineering. You learn that there is a shortage of engineers, making it easy for engineering graduates to find employment, while there is a glut of musicians for whom finding a job is difficult. As a result, you and many other college students decide to major in engineering.

Markets tend to move towards equilibrium as individuals respond to incentives.

Allows for exchange of goods and services using a common unit as a measure of value that is generally accepted as payment

Money

Which is NOT an example of a resource?

Money

College students reduce how much detergent they use for each load of laundry in response to higher detergent prices. (Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve)

Movement along the demand curve

College students rush and buy discount furniture to take advantage of an unexpected price drop. (Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve)

Movement along the demand curve

How does the Free Market view Property Rights?

Private property is respected and kept secure

Established rules for ownership of resources and create incentives for motivation

Property Rights

College students purchase many more energy drinks during finals week than during the rest of the semester. (Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve)

Shift in the demand curve

Students eat out more often as the federal government increases how much grant money it provides students (Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve)

Shift in the demand curve

Recently, a series of studies have demonstrated the considerable beneficial health effects of food and drink derived from the amaranth plant. This has affected consumer tastes for amaranth flour, pods, root, etc. At the same time, particularly favorable weather has resulted in a bumper crop of amaranth plants. Show the impact of these changes by properly shifting the appropriate curve or curves in the graph.

Shift to the right in both supply and demand curve

T/F Normative analysis incorporates opinions and judgements in the analysis. Normative analysis can be based on facts, but it also includes some elements of opinion.

True

T/F Positive analysis deals with "what is" and is entirely based on facts

True

T/F The law of demand says that holding everything else constant, when the price of a good increases, buyers will purchase less of that good. Similarly, holding everything else constant, when the price of a good decreases, buyers will buy more of that good.

True

Consumer Surplus Calculation

Willing To Pay - Actually Pay

either or decisions

a decisions to go about doing an activity sometimes posed in the either or decision

Determine how the equilibrium price and equilibrium quantity in the market for coffee changes if and due to better weather, the price of coffee beans also decreases Equilibrium quantity will...

may increase, decrease, or stay the same

Demand for a luxury item tends to be

more elastic

Demand for an item that uses a large portion of your budget tends to be

more elastic

Over longer periods of time, demand tends to be

more elastic

Please select the economic term that is best described by each statement... People have limited resources.

scarcity

Economics is the

study of the consumption, production, and distribution of goods and services.

Daniel has decided to open his own bakery using locally sourced ingredients and supplies. He provides income and jobs to local suppliers. He also provides his community with a place to buy delicious baked goods.

the invisible hand

Demand is best described as

the quantity of a good or a service that people are willing and able to purchase at different possible prices.

Please select the economic term that is best described by each statement... Everything you do requires giving up something (time, money, etc.).

tradeoffs

Excess Demand

when quantity demanded is more than quantity supplied (SHORTAGE)

Excess Supply

when quantity supplied is more than quantity demanded. (SURPLUS)

Which statement describes the equity-efficiency trade‑off?

Actions intended to make economic outcomes fairer may cause efficiency to decrease.

What is the biggest problem facing Command Economies (socialism)? -Coordination and incentives to direct output -The invisible hand -Free enterprise -Private property

Coordination and incentives to direct output

Determine how the equilibrium price and equilibrium quantity in the market for coffee changes if the price of tea, a substitute for coffee, decreases Equilibrium Price will....

Decrease

marginal decisions

about whether to do a bit more or a bit less of an activity

The law of demand says that

as the price of a good increases, buyers are willing and able to purchase less.

Which word or phrase best identifies the fundamental focus of economics?

choice

if cross price elasticity is negative goods are...

goods are complements

if cross price elasticity is positive goods are....

goods are substitutes

With fewer substitutes, demand tends to be

less elastic