Econ Midterm and Homework 1

An increase in the overall level of prices in an economy is referred to as: A. deflation. B. inflation. C. the income effect. D. the substitution effect.

B

A decrease in the price of a good would lead to A. a decrease in demand. B. a decrease in quantity demanded. C. an increase in demand. D. an increase in quantity demanded

D

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate: A. People respond to incentives. B. Rational people think at the margin. C. The cost of something is what you give up to get it. D. People face tradeoffs.

A

A tradeoff exists between a clean environment and a higher level of income in that: A. laws that reduce pollution raise costs of production and reduce incomes. B. employing individuals to clean up pollution causes increases in employment and income. C. efforts to reduce pollution typically are not completely successful. D. studies show that individuals with higher levels of income pollute less than low-income individuals.

A

A university's football stadium is always sold out, and students who wait in line for hours may be turned away. This indicates: A. the ticket price is below the equilibrium price. B. the ticket price is at the equilibrium price. C. the ticket price is above the equilibrium price.

A

Buyers and sellers who have no influence on market price are referred to as: A. price takers. B. price setters. C. monopolists. D. market pawns.

A

The smaller the price elasticity of demand, the: A. smaller the responsiveness of quantity demanded to a change in price. B. greater the responsiveness of quantity demanded to a change in price. C. more likely the product is a luxury. D. more substitutes the product has.

A

"Beef prices have hit a three-year low in the US. Thanks to a rise in production, that price could be significantly less. The cost of beef is on par with cheaper fare like pork and poultry.": A. positive demand shock B. positive supply shock C. negative demand shock D. negative supply shock

B

At the equilibrium price, the quantity of the good that buyers are willing and able to buy: A. is greater than the quantity that sellers are willing and able to sell. B. exactly equals the quantity that sellers are willing and able to sell. C. is less than the quantity that sellers are willing and able to sell.

B

At the equilibrium price, the quantity of the good that buyers are willing and able to buy: A. is greater than the quantity that sellers are willing and able to sell. B. exactly equals the quantity that sellers are willing and able to sell. C. is less than the quantity that sellers are willing and able to sell. D. Either a) or c) could be correct.

B

Suppose you make jewelry. If the price of gold falls, then we would expect you to: A. be willing and able to produce less jewelry than before at each possible price. B. be willing and able to produce more jewelry than before at each possible price. C. face a greater demand for your jewelry. D. face a weaker demand for your jewelry.

B

The concept of opportunity cost is: A. useful only when discussing the production possibility frontier. B. used to measure costs in terms of the next-best alternative. C. measured in dollars and cents. D. used only by professional economists.

B

When a surplus exists in a market, sellers should: A. raise price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated. B. lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated. C. lower price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated. D. raise price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated.

B

When the price of a good or service changes: A. the demand curve shifts in the opposite direction. B. there is a movement along a given demand curve. C. the supply curve shifts in the opposite direction. D. the demand curve shifts in the same direction.

B

Which of the statements below does not apply to the production-possibility frontier, or PPF? A. The PPF is closely related to the concept of scarcity. B. Quantities of inputs are measured along the axes of the PPF. C. Movements along the PPF may occur as the allocation of resources changes. D. Technology may change the shape of the PPF.

B

Holding all other forces constant, if decreasing the price of a good leads to an increase in total revenue, then the demand for the good must be: A. unit elastic. B. inelastic. C. elastic. D. None of the above is correct because a price decrease never leads to an increase in total revenue.

C

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is: A. 1. B. 0.50. C. 2. D. 1.5.

C

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a: A. 10 percent decrease in the quantity demanded. B. 1 percent decrease in the quantity demanded. C. 2.5 percent decrease in the quantity demanded. D. 0.1 percent decrease in the quantity demanded.

C

In a competitive market, the quantity of a product produced and the price of the product are determined by: A. buyers. B. sellers. C. both buyers and sellers. D. None of the above is correct.

C

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.5. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to: A. fall by 8 percent. B. rise by 8 percent. C. fall by 50 percent. D. rise by 50 percent.

C

Suppose there is a decrease in the price of corn. If corn is an input into the production of ethanol, we would expect the supply curve for ethanol to: A. shift leftward. B. remain unchanged. C. shift rightward. D. become flatter

C

There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be: A. highly responsive to changes in income as well as changes in prices. B. unit elastic. C. inelastic. D. elastic.

C

Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the: A. firm must increase output to maintain profit levels. B. demand for bicycle assembly workers will increase. C. supply of bicycles will shift to the left. D. supply of bicycles will shift to the right.

C

A competitive market is a market in which: A. there are only a few buyers. B. the laws of supply and demand do not apply. C. there are only a few sellers. D. no individual buyer or seller has any significant impact on the market price

D

An example of specialization in production can be seen when: A. wheat is produced in the United States and exchanged for autos produced in Japan. B.most of the potatoes produced in the United States are grown in Idaho and Maine, where the soil and climate are optimal for their production. C. faculty in a university teach courses in their areas of expertise. D. all of the above.

D

Economics is the study of how society manages its? A. limited wants and limited resources. B. limited wants and unlimited resources. C. unlimited wants and unlimited resources. D. unlimited wants and limited resources.

D

If a surplus exists in a market, then we know that the actual price is: A. below the equilibrium price, and quantity supplied is greater than quantity demanded. B. above the equilibrium price, and quantity demanded is greater than quantity supplied. C. below the equilibrium price, and quantity demanded is greater than quantity supplied. D. above the equilibrium price, and quantity supplied is greater than quantity demanded.

D

If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins rises? A. Both the equilibrium price and quantity would increase. B. The equilibrium price would increase, and the equilibrium quantity would decrease. C. The equilibrium price would decrease, and the equilibrium quantity would increase. D. Both the equilibrium price and quantity would decrease.

D

Suppose consumers often purchase muffins to eat while they drink their lattés at local coffee shops. If the price of muffins rises, what would happen to the equilibrium price and quantity of lattés? A. The equilibrium price of lattés would decrease, and the equilibrium quantity of lattés would increase. B. The equilibrium price of lattés would increase, and the equilibrium quantity of lattés would decrease. C. Both the equilibrium price and quantity of lattés would increase. D. Both the equilibrium price and quantity of lattés would decreas

D

When Samuelson and Nordhaus write that "goods are limited while wants seem limitless," they mean that: A. people are basically greedy and not willing to share. B. the government needs to redistribute output. C. current methods of production are inefficient. D. there is no simple solution to the basic economic problems of scarcity and unlimited human wants.

D

Which of the following statements could be used to explain an outward shift in the production-possibility frontier? A. There is a general advancement in technology. B. The population of the country increases. C. New natural resources are discovered under the ocean. D. All of the above apply.

D