Economics Exam 1
Suppose that a disease that affects people who consume beef has been discovered in the United States. One likely result is:
a decrease in demand for beef.
"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:
a falling price of personal computers increases the quantity demanded, not demand.
Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:
an economic problem because Chris has only one hour, and engaging in one activity means giving up the other.
The supply curve illustrates that firms:
increase the quantity supplied of a good when its price rises.
The quantity that sellers wish to sell tends to ______ as price increases, and so the supply curve is _______ sloping.
increase; upward
If the demand for a good decreases as income decreases, then the good is a(n):
normal good.
The Cost-Benefit Principle predicts that:
people will tend to do more of something when its benefits are greater.
If the price of doughnuts decreases, then one would expect the:
quantity of doughnuts supplied to decrease.
Jessica's marginal cost for producing pitcher lemonade is $0.25. Therefore, $0.25 is her:
reservation price.
Efficiency occurs if the:
socially optimal quantity of goods and services is being produced.
Suppose sport utility vehicles get poor gas mileage compared to other available cars. If the price of gasoline increases, then one would then expect:
the demand for sport utility vehičles to decrease.
Dean should play golf instead of preparing for tomorrow's exam in economics if:
the economic surplus from playing golf is greater than the economic surplus from studying.
The entire group of buyers and sellers of a particular good or service makes up:
the market.
The opportunity cost of an activity includes the value of:
the next-best alternative that must be foregone.
A seller’s reservation price is generally equal to:
the seller’s marginal cost.
As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called:
the substitution effect of a price change.
If the price of rubber (an input to the production of tires) increases:
the supply of tires will decrease.
Economists recognize that because people have limited resources:
they have to make trade-offs,
The average benefit of n units of an activity is the:
total benefit of n units divided by n.
Forest lives in complete isolation in Montana. He is self-sufficient and feeds himself through hunting, fishing, and farming. Which of the following statements about Forest is true?
→ O Forest has to make trade-offs.
If the demand for computers increases as consumers' incomes rise, then computers are:
→O a normal good.
Amy is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. The opportunity to Amy cost of going to the movies is:
$35
Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy one for $175, then your economic surplus is:
$75.
Suppose the total benefit of watching 1 baseball 120, and the total benefit of watching 3 games is 125. In this case, the marginal benefit of watching the game is 100, the total benefit of watching 2 games is 3rd game is:
5
Which of the following factors will lead to a decrease in the current supply of a good?
A belief that the price of a good or service will go up in the future
What might cause a demand curve to shift to the right?
An increase in the price of a substitute.
Which of following is NOT true of the equilibrium price?
It is fair in the sense that everyone can afford basic goods and services.
Which of the following is likely to lead to a decrease in the demand for tennis balls?
O An increase in the price of tennis racquets.
If there are no unexploited opportunities for individuals in a particular market, then one can conclude that:
O the market is in equilibrium.
Suppose that the technology used to manufacture laptops has improved. The likely result would be:
an increase in supply of laptops.
If the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are:
complements
When the price of a good changes, the amount of that good that buyers wish to buy changes:
because of both the substitution and the income effects.
Equilibrium price and quantity are determined by:
both supply and demand.
When the current price of a good is below the equilibrium price:
buyers have an incentive to offer to pay sellers more than the current price.
If a country's economic decisions are made by an individual or small number of individuals, then it has a:
centralized economy.
A demand curve is _____ sloping because ______
downward; fewer people are willing to buy an item at higher prices
When the demand curve shifts to the right and supply doesn't change:
equilibrium quantity will rise.
Suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. In this case:
excess demand will lead the price of oranges to rise
If price is above the equilibrium price, then there will be:
excess supply.
The marginal benefit of an activity is the:
extra benefit associated with an extra unit of the activity.
Suppose that the market price for hot dogs sold by street vendors has just risen from $4.50 to $5.00, and that in response Curly has now begun operating a hot dog cart. We can assume that Curly's reservation price for hot dogs is:
greater than $4.50 but no more than $5.00.
Shelly purchases a leather purse for $400. One can infer that:
her reservation price was at least $400.
Economics is best defined as the study of:
how people make choices in the face of scarcity and the implications of those choices for society as a whole.
Suppose that the equilibrium price of apples decreases and the equilibrium quantity of apples increases. This is best explained by a(n):
increase in the supply of apples.
The Cost-Benefit Principle indicates that an action should be taken if, and only if:
its benefits exceed its costs.
If the production of oranges reduces global warming, then the equilibrium quantity of oranges will be _________ the socially optimal quantity.
lower than
The extra cost that results from carrying out one additional unit of an activity is the _______ of the activity.
marginal cost
When the market is in equilibrium:
no unexploited opportunities exist for individuals
A market equilibrium might not maximize total economic surplus because:
sometimes goods entail costs and benefits that do not fall on buyers and sellers.
According to the Cost-Benefit Principle, you should go see the latest Star Wars movie with your friends this week-end if:
the benefits of seeing the movie are greater than the costs of seeing the movie.
According to the Cost-Benefit Principle, you should spend an additional hour studying for an exam if, and only if,:
the benefits of studying for an additional hour exceed the costs of studying for an additional hour.
Microeconomics differs from macroeconomics in that microeconomics focuses on:
the choices made by individuals the implications of those choices.
"All else constant, consumers will purchase more of a good as the price falls." This statement reflects the behavior underlying:
the demand curve.
If supply and demand both increase, the new equilibrium price will be _______ and the new equilibrium quantity will be _______
uncertain; higher