econ final

There is only one explanation for why economists give conflicting advice on policy issues, and it is that they have different values about what policy should try to accomplish.

False

To be binding, a price ceiling must be set above the equilibrium price.

False

Trade does not benefit a nation if that nation has a comparative advantage in the production of that good.

False

When Mario's income decreases, he buys more pasta. For Mario, pasta is a normal good.

False

When a variable that is not named on either axis of a graph changes, we read the change as a movement along the curve.

False

Inflation is the primary determinant of a country's living standards.

False

The gains from specialization and trade are based on absolute advantage.

False

While the production possibilities frontier is a useful model, it cannot be used to illustrate economic growth.

False

The quantity demanded of a good is the amount that buyers are

willing and able to purchase.

A price floor set below the equilibrium price causes a surplus in the market.

False

An outcome is said to be efficient if an economy is conserving the largest possible quantity of its scarce resources while still meeting the basic needs of society.

False

Economists believe that production possibilities frontiers rarely have a bowed shape.

False

Government policies that improve equality usually increase efficiency at the same time.

False

If a country has a lower opportunity cost than its potential trading partner, the country should decide to be self- sufficient.

False

If the demand for a good falls when income falls, then the good is called an inferior good.

False

Refer to Figure 2-11. The opportunity cost of moving from point A to point B is zero.

False

Sellers as a group determine the demand for a product, and buyers as a group determine the supply of a product.

False

Since economists cannot use natural experiments offered by history, they must use carefully constructed laboratory experiments instead.

False

The flatter the demand curve that passes through a given point, the more inelastic the demand.

False

The production possibilities frontier (PPF) illustrates the combinations of goods that society can consume when trading with other producers.

False

When it is said that trade between nations can make both sides of the trade better off, this means that all citizens in each nation will benefit.

False

While the scientific method is applicable to studying natural sciences, it is not applicable to studying a nation's economy.

False

With careful planning, we can usually get something that we like without having to give up something else that we like.

False

Refer to Figure 9-1. From the figure it is apparent that

Guatemala has a comparative advantage in producing coffee, relative to the rest of the world.

The principle stating that, with all else equal, the quantity demanded of a product will increase as the price falls and decrease as it rises is called:

The law of demand

A shortage will occur at any price below equilibrium price and a surplus will occur at any price above equilibrium price.

True

Adam Smith wrote that a person should never attempt to make at home what it will cost him more to make than to buy.

True

All else equal, an increase in demand will cause an increase in producer surplus.

True

An economy can produce at any point on or inside its production possibilities frontier, but it cannot produce at points outside its production possibilities frontier.

True

Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires.

True

Economic growth occurs when an economy is able to increase its production of goods and services.

True

Economists argue that restrictions against ticket scalping actually drive up the cost of many tickets.

True

If a determinant of demand other than price changes, the demand curve shifts.

True

If orange juice and apple juice are substitutes, an increase in the price of orange juice will shift the demand curve for apple juice to the right.

True

Microeconomics is the study of how households and firms make decisions and how they interact in specific markets.

True

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

True

Opportunity cost measures the trade-off between two goods that each producer faces.

True

Positive statements are descriptive, while normative statements are prescriptive.

True

Refer to Figure 2-10. The opportunity cost of moving from point A to point D is 10 dishwashers.

True

The opportunity cost of working out for one hour is the value of the next-best activity that you could have done in that hour.

True

The slope of a line is the ratio of the vertical distance covered to the horizontal distance covered along the line.

True

Workers with high skills and much experience are not typically affected by the minimum wage.

True

Minimum-wage laws dictate

only a minimum wage that firms may pay workers.

What must be given up to obtain an item is called

opportunity cost.

Both public goods and common resources are

nonexcludable.

The law of supply

Scarcity

A decrease in demand shifts the demand curve to the left.

True

One common example of a price floor is the minimum wage.

True

Refer to Figure 10-1. This graph represents the tobacco industry. Without any government intervention, the equilibrium price and quantity are

$2.07 and 38 units, respectively.

A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied.

False

If something happens to alter the quantity supplied at any given price, then we move along the fixed supply curve to a new quantity supplied.

?

When quantity supplied exceeds quantity demanded at the current market price, the market has a surplus, and market price will likely rise in the future to eliminate the surplus.

?

Which of the following is an example of a capital input?

A computer

Which of the following events would cause both the equilibrium price and equilibrium quantity of number two grade potatoes to increase if number two grade potatoes are an inferior good?

A decrease in consumer income

Which of these activities will most likely result in an external benefit?

An elderly woman plants a flower garden on the vacant lot next to her house.

Which of the following would shift the demand curve for gasoline to the right?

An increase in consumer income, assuming gasoline is a normal good

If scientists discover that steamed milk, which is used to make lattés, prevents heart attacks, what would happen to the equilibrium price and quantity of lattés?

Both the equilibrium price and quantity would increase.

All else equal, what happens to consumer surplus if the price of a good increases?

Consumer surplus decreases

Who benefits the most from competitive markets?

Consumers

Which of the following is NOT a factor that influences the elasticity of demand?

Cost of the good

What is likely to happen to a good if a good that is a complement decreases in price?

Demand for the good will increase.

Any measurable element within an economic model that may change is called a(n):

Economic variable

Which of the following is not an example of a market?

In the United States, a sick person cannot legally purchase a kidney.

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The good is a luxury.

A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has eight dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?

Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.

Which of the following is NOT a result of specialization?

One-sided benefits

Who would benefit the most from adding restrictions like patents to enter markets?

Producers

Which is the main motivation for entrepreneurs to take on the risks of producing?

Profit

What will happen in the market for shotgun-shell ammunition now if buyers expect higher shotgun-shell prices in the near future?

The demand for shotgun-shell ammunition will increase.

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

True

Suppose scientists provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see

a decrease in the demand for energy drinks.

If the demand for a good falls when income falls, then the good is called

a normal good.

When the government prevents prices from adjusting naturally to supply and demand, it

adversely affects the allocation of resources.

Trade can make everybody better off because it

allows people to specialize according to comparative advantage.

If muffins and bagels are substitutes, a higher price for bagels would result in

an increase in the demand for muffins.

Refer to Figure 4-4. The movement from point A to point B on the graph is called

an increase in the quantity supplied.

The most important purpose of a market is to

bring buyers and sellers together so they can trade

Suppose the government imposes a tax on cheese. The deadweight loss from this tax will likely be greater in the

eighth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year.

Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce

externalities.

To improve living standards, policymakers should

formulate policies designed to increase productivity.

The "invisible hand" refers to

how the decisions of households and firms lead to desirable market outcomes.

Refer to Figure 2-3. This economy cannot currently produce 70 washers and 70 dryers because

it does not have the resources and technology to produce that level of output.

Farmers withholding some of their current corn harvest from the market because they anticipate a higher price of corn in the near future would cause a

leftward shift in the current supply of corn.

The concept of a market is a

location where buyers and sellers meet to negotiate prices and determine quantities traded.

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

people face tradeoffs

The ______ is when society enforces property rights, contracts, and other rules based on an established set of laws.

rule of law

In a market economy, economic activity is guided by

self-interest and prices.

As a student, Jordyn spends 40 hours per week writing term papers and completing homework assignments. On one axis of her production possibilities frontier is measured the number of term papers written per week. On the other axis is measured the number of homework assignments completed per week. Jordyn's production possibilities frontier is a straight line if

she can switch between writing term papers and completing homework assignments at a constant rate.

Refer to Table 7-11. At a price of $2.00, total surplus is

smaller than it would be at the equilibrium price.

Refer to Figure 4-7. At a price of $35, there would be a

surplus of 400 units.

A baker recently has come to expect higher prices for bread in the near future. We would expect

the baker to supply less bread now than she was supplying previously.

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey.

Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is

unit elastic.

The opportunity cost of constructing a new public highway is the

value of other goods and services that are sacrificed in order to construct the new highway.