Econ Quiz #1

A rightward shift in the demand curve for product C might be caused by:

-An increase in income if C is a normal good -A decrease in income if C is an inferior good -An increase in the price of a product which is a close substitute for C -A decrease in the price of a product which is complementary to C

If the demand curve for product B shifts to the right as the price of product A declines, then:

A and B are complementary goods

Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:

All factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant)

The basic economic argument for the market system is that it promotes:

An efficient allocation of resources

Brinley says that "gas prices are rising because there aren't enough oil refineries." Katie argues that "gas prices are rising because of the growing demand for gasoline from China and India." We can conclude that:

Both statements are positive

How do workers typically express self-interest?

By seeking jobs with the best combination of wages and benefits

The most efficient combination of resources in producing any output is that which:

Can be employed at the least possible cost -Use the plentiful resources over the scarce ones

Positive statement

Fact Example: The temperature is 92 degrees today

Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

Holly's statement is normative, but Ben's is postivie

You should decide to go to a movie:

If the marginal benefit of the movie exceeds the marginal cost

Other things equal, the provision of a per unit subsidy for a product will:

Increase its supply

At the current price there is a shortage of a product. We would expect price to:

Increase, quantity demanded to decrease, and quantity supplied to increase

Normative statement

Opinion Example: It is too hot to play tennis today

Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of what?

Opportunity costs

If the supply of a product decreases and the demand for that product simultaneously increases, then we can conclude that equilibrium:

Price must rise, but equilibrium quantity may either rise, fall, or remain unchanged

If all discrimination in the United States were eliminated, the economy would:

Produce at some point closer to its production possibilities curve

Complementary goods

Products and services that are used together. When the price of one falls, the demand for the other increases (and conversely).

Substitute good

Products or services that can be used in place of each other. When the price of one falls, the demand for the other product falls; conversely, when the price of one product rises, the demand for the other product rises.

If the supply and demand curves for a product both decrease, we can say that equilibrium:

Quantity must decline, but equilibrium price may either rise, fall, or remain unchanged

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as:

Rational self-interest, because he's attempting to increase his own income by identifying and satisfying someone else's wants

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread, we would expect the price of wheat to:

Rise, the supply of bread to decrease, and the demand for potatoes to increase

During the 1970s the price of oil rose dramatically, which in turn caused the price of coal to increase. This can best be explained by saying that oil and coal are:

Substitute goods and the higher price for oil increased the demand for coal

The idea that firms and resource suppliers in seeking to further their own self-interest in a competitive market economy also simultaneously promotes the public or social interest is a description of:

The "invisible hand"

Some agricultural sub-Saharan nations of Africa have overfarmed and overgrazed their land to the extent that significant portions of it have turned into desert. This suggests that:

The production possibilities curves of such nations have shifted inward

Which of the following statements would be most likely to shift the production possibilities curve to the right?

a. A sudden and substantial expansion of consumer wants b. An improvement in the literacy level and general level of education c. A decline in the size of the population and labor force d. Shifting resources from the production of capital goods to the production of consumer goods b.

Which of the following would not shift the demand curve for beef?

a. A widely publicized study which indicates beef increases one's cholesterol b. A reduction in the price of cattle feed c. An effective advertising campaign by pork producers d. A change in the incomes of beef consumers b.

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

a. An increase in supply b. An increase in demand c. A decrease in supply d. A decrease in demand a.

Which of the following statements are correct?

a. An increase in the price of C will decrease the demand for complementary product D b. A decrease in income will decrease the demand for an inferior good c. An increase in income will reduce the demand for a normal good d. A decline in the price of X will increase the demand for substitute product Y a.

In which of the following instances will the effect on equilibrium price be dependent on the magnitude of the shifts in supply and demand?

a. Demand rises and supply rises b. Supply falls and demand remains constant c. Demand rises and supply falls d. Supply rises and demand falls a.

Assume product A is an input in the production of product B. In turn product B is a complement to product C. We can expect a decrease in the price of A to:

a. Increase the supply of B and increase the demand for C b. Decrease the supply of B and increase the demand for C c. Decrease the supply of B and decrease the demand for C d. Increase the supply of B and decrease the demand for C a.

In moving along a stable supply curve which of the following is not held constant?

a. The number of firms producing this good b. Expectations about the future price of the product c. Techniques used in producing this product d. The price of the product for which the supply curve is relevant d.

Which statement is correct?

a. The operation of a market system eventually results in an equal distribution of income b. Producers are "kings" in a market economy because they determine what is produced c. The market system is efficient at all allocation of resources, but not consumer goods to their most valued uses d. Freedom of choice and enterprise are essential elements of the market system d.

In moving along a stable demand curve which of the following is not held constant?

a. The price of the product for which the demand curve is relevant b. Price expectations c. Consumer incomes d. The prices of complementary goods a.

With a down sloping demand curve and an up sloping supply curve for a product, an increase in consumer income will:

a. increase equilibrium price and quantity if the product is a normal good b. decrease equilibrium price and quantity if the product is a normal good c. have no effect on equilibrium price and quantity d. reduce the quantity demanded, but not shift the demand curve a.