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The law of comparative advantage says that a person should produce a good if he or she: a. is equally good at producing this good as someone else is. b. has the lowest opportunity cost of producing that good. c. has a comparative advantage in a related activity. d. has the greatest desire to consume that good. e. has an absolute advantage in a related activity.

The law of comparative advantage says that: a. comparative advantage exists only when one person has an absolute advantage in the production of two goods. b. the individual with the lowest opportunity cost of producing a particular good should produce it. c. gains from trade are possible only when one person has a comparative advantage in producing both goods. d. whoever has an absolute advantage in producing a good also has a comparative advantage in producing that good. e. whoever has a comparative advantage in producing a good also has an absolute advantage in producing that good.

The payments in return for labor and capital are _____, respectively. a. rent and wages b. wages and interest c. interest and profit d. profit and wages e. profit and rent

What is the effect of a decrease in the price of potato chips on the market for pretzels, a substitute good, that is initially in equilibrium? a. Equilibrium price will increase and equilibrium quantity of pretzels will fall. b. Both equilibrium price and equilibrium quantity of pretzels will fall. c. Equilibrium price and equilibrium quantity of pretzels remain unchanged. d. Both equilibrium price and equilibrium quantity of pretzels will increase. e. Equilibrium price will fall and equilibrium quantity of pretzels will increase.

When quantity demanded of a good exceeds the quantity supplied at the prevailing market price, _____. a. the price of the good will decrease b. the price of the good will tend to increase c. the demand curve shifts rightward until the surplus is eliminated d. the market is in equilibrium e. the supply curve shifts leftward until the surplus is eliminated

Which of the following broad categories are resources divided into? a. Free, scarce, abundant, and unlimited b. Natural resources, labor, capital, and entrepreneurial ability c. People, money, and machines d. Human, technological, and government e. Savings, spending, investment, and capital

Which of the following is a reason why government is a participant in a market-oriented economy? a. To provide more inequality in the distribution of income b. To enforce contracts and protect private property c. To promote externalities d. To promote collusion e. To promote the growth of natural monopolies

Books Magazines 400 0 300 200 200 350 100 450 0 500 Refer to Table 2-3. What is the opportunity cost to Libraryland of increasing the production of books from 200 to 300? a. 100 magazines b. 150 magazines c. 200 magazines d. 350 magazines

b. 150 magazines

Refer to Figure 3-9. If Uzbekistan and Azerbaijan each divides its time equally between making bolts and making nails, then total production is a. 15 bolts and 40 nails. b. 25 bolts and 70 nails. c. 30 bolts and 80 nails. d. 50 bolts and 140 nails

b. 25 bolts and 70 nails

Refer to Figure 3-5. Hosne's opportunity cost of one purse is a. 4/5 wallet and Merve's opportunity cost of one purse is 2/3 wallet. b. 4/5 wallet and Merve's opportunity cost of one purse is 3/2 wallets. c. 5/4 wallets and Merve's opportunity cost of one purse is 2/3 wallet. d. 5/4 wallets and Merve's opportunity cost of one purse is 3/2 wallets.

b. 4/5 wallet and Merve's opportunity cost of the one purse in 3/2 wallets

Refer to Figure 2-12. Which of the following combinations of points are both efficient and attainable for this economy? a. B, C b. A, D, H c. A, B, C, D, H d. F, G

b. A, D, H

Refer to Figure 3-10. If point A represents Alice's current production and point B represents Betty's current production, under what circumstances can both Alice and Betty benefit from specialization and trade? a. Alice produces more pizzas and Betty produces more lemonade. b. Alice produces more lemonade and Betty produces more pizzas. c. Both Alice and Betty produce only pizzas. d. There are no circumstances under which both Alice and Betty can benefit from specialization and trade.

b. Alice produces more lemonade and Betty produces more pizzas

Refer to Table 3-17 The US has a comparative advantage in the production of a. wine. b. cheese. c. both wine and cheese. d. neither wine nor cheese.

b. cheese

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

b. efforts to reduce pollution typically are not completly successful

Refer to Figure 2-2. Carla regularly buys fruits and vegetables at a grocery store. Roberto regularly pays a lawn-care company to mow his lawn. If the flow of fruits and vegetables from the grocery store to Carla is represented by an arrow from Box C to Box B of this circular-flow diagram, then the money paid by Roberto to the lawn-care company is represented by an arrow a. from Box A to Box D. b. from Box B to Box C. c. from Box C to Box B. d. from Box D to Box A.

b. from Box B to Box C

A statement describing how the world is a. is a normative statement. b. is a positive statement. c. would only be made by an economist speaking as a policy adviser. d. would only be made by an economist employed by the government.

b. is a positive statement

In the short run, an increase in the money supply is likely to lead to a. lower unemployment and lower inflation. b. lower unemployment and higher inflation. c. higher unemployment and lower inflation. d. higher unemployment and higher inflation.

b. lower unemployment and higher inflation

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that a. goods are scarce. b. people face tradeoffs. c. income must be earned. d. households face many decisions

b. people face tradeoffs

Refer to Figure 3-4. Perry has a comparative advantage in the production of a. novels and Jordan has a comparative advantage in the production of poems. b. poems and Jordan has a comparative advantage in the production of novels. c. novels and Jordan has a comparative advantage in the production of neither good. d. neither good and Jordan has a comparative advantage in the production of novels.

b. poems and Jordan has a comparative abantage in the production of novels

Refer to Table 3-4 Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. The farmer has an absolute advantage in the production of a. meat. b. potatoes. c. both goods. d. neither good.

b. potatoes

Refer to Table 3-4. The farmer has a comparative advantage in the production of a. meat. b. potatoes. c. both goods. d. neither good

b. potatoes

A demand curve shows the relationship between price and a. income. b. quantity demanded. c. production. d. income and quantity demanded.

b. quantity demanded

If Sam can chop up more carrots per minute than Joe can, then: a. Sam must have a comparative advantage in carrot chopping. b. Joe must have a comparative advantage in carrot chopping. c. Sam has an absolute advantage in carrot chopping. d. Joe has an absolute advantage in carrot chopping. e. we can conclude nothing about absolute advantage.

In economics, the term marginal usually refers to: a. a low-quality product or resource. b. an unimportant and irrelevant economic variable. c. a small change in an economic variable. d. a footnote or minor point. e. an all-or-nothing economic decision.

Suppose you have a choice of working full-time during the summer or going full-time to summer school. Summer tuition and books are $2,200. If you worked, you could make $7,000. Your rent is $1,000 for the summer, regardless of your choice. If these are the only relevant costs to consider, the opportunity cost of going to summer school is: a. $7,000. b. $8,000. c. $9,200. d. $10,200. e. $2,200.

Which of the following is a disadvantage of a corporation compared to a sole proprietorship? a. Difficulty raising start-up money b. Vulnerability in the case of the death of an owner c. Double taxation of corporate income d. Lack of profitability e. Limited liability

Which of the following is an example of a positive economic statement? a. Workers with families should be paid at least the minimum wage. b. If crime rates reduced, the world would be a better place to live in. c. An increase in the price of gasoline will cause a reduction in the amount of gasoline purchased. d. Corrupt politicians ought to be voted out of office. e. Marginal tax rates should be reduced for individuals in the highest tax bracket.

A good that takes up a very large percentage of a consumer's budget will tend to have: a. a perfectly elastic demand. b. an inelastic demand. c. an elastic demand. d. an upward-sloping demand curve. e. many close substitutes.

A resource is something that: a. exists in unlimited quantities. b. is provided by nature, not produced by society. c. is used to produce goods and services. d. is always available free of cost. e. must be produced by a firm.

Consider the market for a good that is initially in equilibrium. Which of these is most likely to occur if both demand and supply for this good increases during a particular point in time? a. Equilibrium quantity will decrease b. Equilibrium price will increase c. Equilibrium quantity will increase d. Both equilibrium price and equilibrium quantity will decrease e. Equilibrium price will decrease

Figure 4.3 shows the supply curves for baby formula. In the figure given below, the development of more efficient production technologies for baby formula is likely to cause which of the following changes? a. A leftward shift of the supply curve from S2 to S1 b. A movement from point a to point b on the supply curve S1 c. A rightward shift of the supply curve from S1 to S2 d. A movement from point c to point d on the supply curve S2 e. A movement from point b to point a on the supply curve S1

Figure 5.3 shows a linear demand curve. Between points A and B, the demand is: a. unitary. b. inelastic. c. elastic. d. perfectly inelastic. e. perfectly elastic.

If Daniel produces one pair of shoes in 4 hours and Sarah produces one pair of shoes in 3 hours, then: a. Sarah has a comparative advantage in shoemaking. b. Daniel has an absolute and a comparative advantage in shoemaking. c. Sarah has an absolute advantage in shoemaking. d. Sarah has an absolute and a comparative advantage in shoemaking. e. Daniel has a comparative advantage in shoemaking.

If a business produces and sells only one unit of a good, its profit would be the: a. return paid to the firm's bank on its outstanding loans. b. price of the product minus the wages paid for the labor used to produce it. c. price of the product minus the cost of the resources used to produce the product. d. wages paid for the labor used to produce the product minus the price. e. price received for the good.

If a firm facing a perfectly elastic demand curve raises its price, then: a. it will lose its market share. b. its sales will increase. c. its sales will fall to zero. d. it will lose some, but not all, of its sales. e. it will still sell exactly the same amount of output as it did at the lower price.

If an increase in the price of peanut butter causes a decline in the demand for jelly, then: a. both goods are necessities. b. the goods are substitutes. c. the goods are complements. d. peanut butter is an inferior good. e. jelly is an inferior good.

If corn and soybean are alternative crops grown by most farmers, an increase in the price of corn is likely to: a. increase the supply of soybeans. b. decrease the supply of corn. c. decrease the supply of soybeans. d. increase the supply of corn. e. decrease the demand for soybeans.

Table 5.4 shows the price and quantity combinations for a product. The demand for the good is _____, and an increase in the price of the product from $40 to $60 per unit will _____ total revenue. Table 5.4 Quantity Price Old 20 $40 New 10 $60 a. unit elastic; increase b. unit elastic; not change c. elastic; decrease d. inelastic; increase e. elastic; decrease

Table 5.6 shows the change in the quantity demanded for Good A and Good B as a result of a change in income. Use the information in the table below to calculate the value of the income elasticity of demand for Good A. Table 5.6 Quantity Income Good A 100 $1,000 120 $2,000 Good B . 200 . $20 140 . $35 a. 2/9 b. 1 c. 3/11 d. 9/2 e. 11/3

The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, if all the economy's resources are used efficiently to produce only good B, then the economy will be at point: a. e. b. h. c. g. d. i. e. b.

The following figure shows the demand curves for baby formula. Which of the following changes is likely to happen if the price of baby formula increases? a. A movement along demand curve D1 from point a to point b b. A shift in the demand curve from D1 to D2 c. A movement along the demand curve D2 from point d to point c d. A shift in the demand curve from D2 to D1 e. A movement from point b on the demand curve D1 to point c on the demand curve D2

The market supply curve of a particular product indicates the total quantities: a. of complements offered for sale. b. that buyers are willing to purchase at alternative prices. c. that sellers are willing and able to offer at alternative prices. d. that are actually sold during a given time period. e. that sellers are willing to offer for sale at a fixed price

The price elasticity of demand for milk when quantity is measured in gallons will be _____ the price elasticity when quantity is measured in quarts. a. less than b. four times c. the same as d. two times e. one-fourth of

When drawing a production possibilities frontier for two goods, all of the following are usually assumed except one. Which is the exception? a. Resources can be shifted from the production of one good to the other. b. The production possibilities frontier is drawn for a particular time period. c. The quantity of resources is rapidly growing. d. Resources are fully and efficiently employed. e. Technology is fixed.

Refer to Table 3-1 Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate. Which of the following combinations of wheat and beef could Zardia not produce in one 10-hour day? a. 10 bushels of wheat and 45 pounds of beef b. 20 bushels of wheat and 30 pounds of beef c. 25 bushels of wheat and 25 pounds of beef d. 30 bushels of wheat and 15 pounds of beef

c. 25 bushels of wheat and 25 pounds of beef

Refer to Figure 3-3. Suppose Arturo is willing to trade 6 burritos to Dina for each 10 tacos that Dina produces and sends to Arturo. Which of the following combinations of tacos and burritos could Dina then consume, assuming Dina specializes in taco production and Arturo specializes in burrito production? a. 100 tacos and 200 burritos b. 200 tacos and 130 burritos c. 300 tacos and 60 burritos d. 340 tacos and 40 burritos

c. 300 tacos and 60 burritos

Refer to Figure 2-8, Panel (a). In order to gain 2 donuts by moving from point L to point M, society must sacrifice a. efficiency. b. employment. c. 4 cups of coffee. d. More than one of the above is correct

c. 4 cups of coffee

Refer to Figure 3-10. If Alice produces only lemonade, she can produce a. 200 pitchers per day. b. 300 pitchers per day. c. 400 pitchers per day. d. 450 pitchers per day.

c. 400 pitchers per day

Betty's Bakery bakes fresh bread every morning. Any bread not sold by the end of the day is thrown away. A loaf of bread costs Betty $2.00 to produce, and she prices loaves of bread at $3.50 per loaf. Suppose near the end of one day Betty still has 12 loaves of bread on hand. Which of the following is correct? a. Betty should only sell the remaining bread for $3.50 per loaf since that is the regular price. b. Betty should only sell the remaining bread for $2.00 per loaf or more since that is what the bread costs to make. c. Betty should be willing to sell the remaining bread for any price above $0 per loaf since she will have to throw it away if she does not sell it for something. d. Betty should just throw the bread away and change the price of her bread starting tomorrow to make sure she sells all of her bread each day.

c. Betty should be willing to sell the remaining bread for any price above $0 per loaf since she will have to throw it away if she does not sell it for something.

Economic models a. are constructed to mirror reality as closely as possible, and in this respect economic models are no different from other scientific models. b. are constructed to mirror reality as closely as possible, and in this respect economic models are very different from other scientific models. c. are simplifications of reality, and in this respect economic models are no different from other scientific models. d. are simplifications of reality, and in this respect economic models are very different from other scientific models.

c. are simplifications of reality, and in this respect economic models are no different from other scientific models

In conducting their research, economists face an obstacle that not all scientists face; specifically, in economics, it is often difficult and sometimes impossible to a. make use of theory and observation. b. rely upon the scientific method. c. conduct laboratory experiments. d. find articles or books that were written before 1900.

c. conduct laboratory experiments

In a market economy, who makes the decisions that guide most economic activity? a. firms only b. households only c. firms and households d. government

c. firms and households

The use of the coordinate system allows a. for the display of the flows of dollars, goods and services, and factors of production in an economic system. b. for the display of how labor and other resources are organized in the production process. c. for the display of two variables on a single graph. d. for the creation of pie charts and bar graphs.

c. for the display of two variables on a single graph

In the circular-flow diagram, in the markets for a. goods and services, households and firms are both sellers. b. goods and services, households are sellers and firms are buyers. c. the factors of production, households are sellers and firms are buyers. d. the factors of production, households and firms are both buyers.

c. the factors of production, households are sellers and the firms are buyers

Max and Maddy charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, seven people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have seven or five cars parked on their lawn does not affect their costs. From this information it follows that a. they should leave the price at $10. b. it does not matter if they charge $10 or $15. c. they would do better charging $15 than $10. d. they should raise the price even more

c. they would do better charging $15 than $10.

Which of the following is an example of using the scientific method with a natural experiment? a. Measuring how long it takes a marble to fall from a ten story building. b. Comparing plant growth with and without a soil additive. c. Tracking the price of oil when a war in the Middle East interrupts the flow of crude oil. d. Observing the reaction when two chemicals are mixed togethe

c. tracking the price of oil when a war in the Middle East interrupts the flow of crude oil

Which of the following is necessary for the invisible hand of market prices to work properly?

competition and property rights that are well-defined and enforced

A rational decision maker will take only those actions for which the expected marginal benefit: a. is positive. b. exactly equals the expected marginal cost. c. is at its maximum level. d. is greater than or equal to the expected marginal cost. e. is less than the expected marginal cost.

Consumers need information to make good choices. In the context of this information, which of the following is correct? a. Brand names offer no informational content. b. Advertising is always harmful to consumers. c. Marginal analysis does not apply to the acquisition of information. d. Information is scarce and therefore valuable. e. Acquiring more information is always rational.

Economic theory: a. expresses normative values. b. invents imaginative and interesting stories. c. predicts the behavior of a specific economic decision maker after an economic change. d. predicts the average behavior of a group of similar economic decision makers after an economic change. e. uses only perfect and complete information.

One might commit the fallacy of composition by concluding that: a. an event that precedes another is necessarily the cause of the latter. b. statements that are true during prosperity are necessarily true during depression. c. intentions need not coincide with actions. d. what is good for the individual is necessarily good for the group. e. the composition of a complex product is not revealed by its exterior appearance.

Don can produce 10 pens or 20 pencils in one hour while Bob can produce 5 pencils or 15 pens in one hour. Which of the following statements is correct? a. Don does not have a comparative advantage in the production of either good. b. Bob has a comparative advantage over Don in the production of pencils. c. Don has a comparative advantage over Bob in the production of pens. d. Bob has an absolute advantage over Don in the production of pens. e. Bob has an absolute advantage over Don in the production of pencils

If Jason can wash a car in 20 minutes and wash a dog in 10 minutes and Megan can wash a car in 15 minutes and wash a dog in 15 minutes, which of the following statements is true? a. The opportunity cost of washing a car is greater for Megan. b. The opportunity cost of washing a car is one dog bath for Jason. c. Megan could wash two cars in the time it takes Josh to wash a dog. d. Jason has both a comparative and an absolute advantage in washing a dog. e. The opportunity cost of washing a dog is lower for Jason.

In one week, Mohammed can knit 5 sweaters or bake 240 cookies. In one week, Aisha can knit 15 sweaters or bake 480 cookies. Which of the following is correct? a. Mohammed has an absolute advantage in both tasks and a comparative advantage in knitting sweaters. b. Aisha has an absolute and comparative advantage in both tasks. c. Mohammed has an absolute advantage in both tasks and a comparative advantage in baking cookies. d. Aisha has an absolute advantage in both tasks and a comparative advantage in knitting sweaters. e. Mohammed has an absolute and comparative advantage in both tasks.

Points inside the production possibilities frontier represent: a. currently unattainable combinations of outputs. b. currently unattainable combinations of resources. c. full and efficient use of all resources. d. inefficiency or unemployment. e. the most desirable combinations of outputs.

Suppose consumers spent $42 million on Christmas trees last year, when the average tree cost was $30. This year they spend $42 million, when the average tree costs $25. Assume that everything else remains constant. This data suggests that: a. the demand for trees is inelastic. b. the price of the Christmas trees stayed the same. c. consumers bought the same number of Christmas trees this year as last year. d. the demand for trees is unit elastic. e. total revenue to tree producers rose this year.

The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, given the quantity of resources and level of technology, which of the following points is unattainable? a. b. b. g. c. i. d. e. e. h.

The table given below shows the quantity supplied and the quantity demanded for a good at different prices. If the market price of the good is $1.20, there will be a _____. a. surplus of 20 units b. shortage of 30 units c. surplus of 60 units d. shortage of 60 units e. surplus of 30 units

Unlike a service, a good: a. is abundant and free. b. is a resource. c. is desirable. d. is physical and tangible. e. uses resources to satisfy wants.

Which of the following is likely to bring about a movement along the supply curve for oranges? a. A change in the price of fertilizer b. A change in the demand for grapefruit c. A change in wages paid to orange pickers d. A change in the price of oranges e. A change in weather conditions

Which of the following is not a characteristic of pure capitalism? a. A reliance on prices to direct resources to their best uses b. Private property rights c. Competitive markets d. Central planning e. Laissez-faire policies

Which of the following will lead to an increase in quantity supplied of a given good? a. An increase in population b. A technological improvement c. An increase in the price of an alternative good d. An increase in the price of the good e. An increase in resource prices

Following the implementation of laws requiring automobiles to have seat belts, which of the following occurred? a. An individual's probability of surviving an auto accident rose. b. There was an increase in pedestrian deaths. c. There was an increase in automobile accidents. d. All of the above are correct.

d. all of the above are correct

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night a. is $40. b. is $80. c. is $120. d. cannot be determined from the information given

d. cannot be determined from the infromation given

For a number of years country A had inflation of 3% but for the last five years has had inflation of 6%. Country B had inflation of 4% for many years, but very recently inflation unexpectedly rose to 9%. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment? a. both country A and country B b. neither country A nor country B c. country A but not country B d. country B but not country A

d. country B but not country A

The production possibilities frontier illustrates a. the trade-off between efficiency and equality. b. the combination of output that an economy should produce. c. the combination of output that each member of society should consume. d. None of the above is correct.

d. non of the above is correct

Because it is difficult for economists to use experiments to generate data, they generally must a. do without data. b. substitute assumptions for data when data are unavailable. c. rely upon hypothetical data that were previously concocted by other economists. d. use whatever data the world gives them.

d. use whatever data the world gives to them

Refer to Figure 2-4. Inefficient production is represented by which point(s)? a. Y, Z b. V c. V, W d. W

d. w

Use this graph to answer the following questions. In this example, what is occurring within the market? What is there an excess of? What could solve the problem shown in this graph?

disequilibrium, demand, high prices

Which of the following is the category to which the largest portion of households' personal income is allocated? a. Purchases of nondurable goods b. Taxes collected by government c. Purchases of durable goods d. Savings e. Purchases of service

You currently subscribe to two magazines and are trying to decide whether you should subscribe to a third. What should determine your decision if you are economically rational? a. The total cost of the magazines compared to the total satisfaction you would receive b. The total amount of satisfaction you would get from the magazines c. The cost of the third magazine including the time it takes to read it d. The enjoyment you would get from the third magazine e. The cost of the third magazine compared to the additional enjoyment you would get from it

Consider a market for coffee that is initially in equilibrium. If tea harvest is bad in a particular year, then identify the most likely impact on the equilibrium price and quantity of coffee. a. The price of coffee will decrease while the quantity of coffee will increase. b. Both the price and the quantity of coffee will decrease. c. The price of coffee will increase, while the quantity of coffee will decrease. d. There will be no impact on the equilibrium price and quantity of coffee. e. Both the price and the quantity of coffee will increase.

Consider the market for a good that is initially in equilibrium. For a given upward-sloping supply curve, an increase in demand will typically: a. increase quantity but price could change in either direction. b. increase price but quantity could change in either direction. c. increase price but leave quantity unchanged. d. decrease both quantity and price. e. increase both quantity and price.

Demand is inelastic only if the price elasticity of demand has an absolute value: a. greater than 1. b. of 1. c. greater than 5. d. greater than 0. e. greater than 0 but less than 1.

Figure 5.3 shows a linear demand curve. Between points C and D, the demand is: a. perfectly elastic. b. elastic. c. perfectly inelastic. d. unitary. e. inelastic.

If a firm raises the price of its product, its total revenue will: a. increase only if demand is price elastic. b. always increase. c. remain constant regardless of the price elasticity of demand. d. never increase. e. increase only if demand is price inelastic.

If you enjoy playing golf, the opportunity cost of cleaning your room: a. is smaller on sunny days than it is on rainy days. b. is the same on sunny days as it is on rainy days. c. is equal to the opportunity cost of any other chore you have to do that day. d. does not change with weather conditions. e. is greater on sunny days than it is on rainy days.

In the figure given below, a price floor set at $20.00 will: a. increase the equilibrium price. b. reduce the equilibrium quantity. c. lead to a surplus of 20 units. d. lead to a surplus of 10 units. e. have no impact on the equilibrium price and quantity.

The price elasticity of demand is useful because it measures the responsiveness of _____ to changes in _____. a. taxpayers; demand b. producers; supply c. producers; income d. consumers; demand e. consumers; price

Which of the following is most likely to cause the demand for ice cream, a normal good, to decrease? a. A warmer weather b. A decrease in the price of milk c. A decrease in the price of ice cream d. An increase in the number of consumers e. A decrease in consumer income

Which of the following is the best example of substitute goods? a. Coffee and cream b. Money and biscuits c. Tortillas and salsa d. Videotapes and VCRs e. Powdered and liquid laundry detergent

Which of the following would most likely increase the supply of college textbooks? a. Exodus of five major publishers from the industry b. An increase in the cost of paper used in books c. Expectation of a price rise in the future d. An increase in the wage rate of workers associated with printing e. An improvement in the technology used in book production

Deciding how to make the best use of limited resources to satisfy virtually unlimited wants is known in economics as

economizing behavior.

when producers supply more or less of it based on changing prices.

elastic

What is the point at which supply and demand intersect at a given price?

equilibrium point

The price of a product has dropped greatly, and store owners do not have enough of the item to meet demand. Demand for a new truck is beginning to decrease, but car dealerships still have too many of these trucks on their lots. The price for a popular holiday toy has risen too high, and consumers are not purchasing items in stock in stores.

excess demand, excess supply, excess supply

"A" represents the new quantity demanded, while "B" represents the new quantity supplied. What is the result of these changes? Based on this graph, what will prices most likely do?

excess supply, Fall

A point inside the production possibilities frontier is

feasible, but not efficient

Use the drop-down menu to complete each statement. The law of supply states that as the price of a good rises, the supply of that good will . According to the law of supply, as the price of a good falls, the supply of that good will .

increase, decrease

when producers do not change how much of it is supplied when prices change.

inelastic

If Income elasticity of demand is less than zero, then

inferior

Refer to the chart, and then use the drop-down menu to complete each statement. The supply of jeansas the price rises. When the price per pair is $50, the quantity supplied is. As the price increases from $20 to $60, the quantity supplied increases by.

is increasing, 40, 40

The following graph shows the market for peanut butter in Chicago, where there are over 1,000 stores that sell peanut butter at any given moment. Suppose the price of hazelnut spread increases. (Assume that people regard peanut butter and hazelnut spread as substitutes.) Show the effect of this change on the market for peanut butter by shifting one or both of the curves on the following graph, holding all else constan

it will shift the demand curve up and the supply curve will not move

If a shortage exists in the car market, then the current price must be (higher/lower) than the equilibrium price. For the market to reach equilibrium, you would expect (buyers to offer higher prices/ sellers to offer lower prices)

lower and buyers to offer higher prices Prices below the equilibrium price generate excess demand because buyers are willing to purchase more cars than sellers are willing to sell—the quantity supplied is less than the quantity demanded at that price. Some buyers who wish to purchase cars at the current price will be unable to do so. In order to purchase cars, some buyers will offer higher prices. As buyers bid and drive prices upward, some sellers will be willing to sell additional cars. Therefore, the market will move toward the equilibrium price, where the quantity of cars demanded by buyers equals the quantity supplied by sellers.

When economists say an individual has made a rational choice, they mean the individual has

made the choice by weighing their own subjective costs and benefits.

An economy produces hot dogs and hamburgers. If a discovery of the remarkable health benefits of hot dogs were to change consumers' preferences, it would

move the economy along the production possibilities frontier.

ndicating whether an event will cause a movement along the supply curve for peanut butter or a shift of the supply curve for peanut butter::: A decrease in the price of peanut butter

movement along

If Income elasticity of demand is greater than zero, then

normal

Competitive behavior

occurs as a reaction to scarcity.

When economists say that people choose rationally, this means

people respond in predictable ways to changes in costs and benefits

If the resources of an economy are being used inefficiently, it would be

possible to increase production of all goods simultaneously.

Refer to Table 2-3. The farmer and the rancher both could benefit if the farmer were to specialize in

potatoes and the rancher were to specialize in meat.

Production possibilities curve are usually bowed outward. This is because

resources are specialized, that is, some are better at producing particular goods rather than other goods.

When bagels and cream cheese are compliments the fall in the price of flour will...

shift the supply curve to the right for both bagels and cream cheese; however the demand curve will also shift up for cream cheese because the fall in the equilibrium price of bagels increases the demand for cream cheese, causing the price and the quantity of cream cheese to rise

Middlemen, such as grocers, stockbrokers, and Realtors,

specialize in reducing transactions costs.

Two products that serve similar purposes for a consumer would be referred to as

substitutes.

The discovery of a large new reserve of crude oil will shift the ________ curve for gasoline, leading to a ________ equilibrium price.

supply, lower

An increase in ________ will cause a movement along a given demand curve, which is called a change in ________.

supply, quantity demanded

The discovery of a large new reserve of crude oil will shift the ________ curve for gasoline, leading to a ________ equilibrium price.

supply; lower

Which of the following would most likely increase the price of automobiles?

the United Auto Workers union obtaining a substantial wage increase for auto workers

All of the following topics fall within the study of microeconomics EXCEPT

the influence of the government budget deficit on economic growth.

"Now that Blake paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both." This statement most clearly reflects

the law of comparative advantage.

The opportunity cost to the United States of placing a man on the moon was

the loss of utility from the highest valued bundle of products that had to be forgone because of the moon mission.

According to the law of comparative advantage, both individuals and nations will be able to produce a larger joint output if each productive activity is undertaken by

the low opportunity cost producer.

The law of demand indicates that

the quantity of a good that people will buy is inversely related to the price of the good.

The following graph shows the market for pizzas in San Diego, where there are over 1,000 pizza restaurants at any given moment. Suppose the number of pizza restaurants increases significantly. Show the effect of this change on the market for pizzas by shifting one or both of the curves on the following graph, holding all else constant.

the supply curve shift to the right as there are more quantity supplied but the D curve does not move

The opportunity cost of an action is

the value of the best opportunity that must be sacrificed in order to take the action.

Refer to Figure 3-21. At the quantity Q3,

the value to buyers is less than the cost to sellers

If Kim can either wash 10 cars or wax 2 cars during a day, and Vince can either wash 17 cars or wax 2 cars during a day, then according to the law of comparative advantage,

their total output can be expanded if Kim specializes in waxing and Vince in washing.

When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage,

they both obtain consumption outside their production possibilities frontier.

Which goods will a nation typically import?

those goods in which other nations have a comparative advantage

other things are assumed to be constant

use their property in ways that others value because the market will generally reward them with profits (or a higher selling price) if they do so.

((End Value - Start Value) / (Start Value)) * 100

% Change Formula

Cross-Price Elasticity of Demand

% change in Qd for good 1/ % change in price of good 2

Price Elasticity of Demand formula

% change in Qd/ % change in P

On this graph, the equilibrium point occurs at which price?

Determinants of price elasticity

-Extent to which close subs are available -Necessity or luxury -Broad or narrow -Long Run vs. Short Run

"Organize economic activity"

-What goods to produce -How to produce them -How much of each to produce -Who gets them

Invisible Hand

-Written by Adam Smith in "The Wealth of Nations" (1776) -Each of these households and firms acts as if "led by an invisible hand" to promote economic well-being. -Interaction of buyers and sellers determines prices -Each price reflects the good's value to buyers and the cost of producing the good -Prices guide self-interested households and firms to make decisions that, in many cases, maximize society's economic well-being

Firms

1. Buy/hire factors of production, used to produce goods and services. 2. Sells goods and services

Movement along the demand/supply curve

A change in price of the good itself.

Absolute Advantage

Ability to produce a good using fewer inputs than another producer

Absolute advantage

Ability to produce a good using fewer inputs than another producer.

Large

Do luxuries tend to have large or small income elasticities?

Small

Do necessities, such as food and clothing, tend to have large or small income elasticities?

Supply Curve Shifter: Expectations

Example: Events in Middle East lead to expectations of higher oil prices. In response, owners of Texas oilfields reduce supply now, save some inventory to sell later at a higher price. Therefore, S curve shifts to right.

Scarcity

Exists because people have wants that unlimited relative to the ability of sources to satisfy those wants.

Demand Curve Shifters: Expectations

Expectations affect consumers' buying decisions

True or False: When both the demand and supply curve shift, the curve that shifts with the smaller magnitude determines the effect on the undetermined equilibrium object.

False

True or False: An increase in the demand for notebooks raises the quantity of notebooks demanded but not the quantity supplied.

False; An increase in the demand for notebooks will cause a movement along the supply curve, increasing both the quantity of notebooks demanded and the quantity supplied

T or F. When the demand curve and the supply curve shift in the direction previously indicated(supply increased quantity and demand increased quantity), the effect on the equilibrium price is clear even without knowing the magnitude of the shifts.

False; the equilibrium could either increase or decrease or remain unchanged its hard to tell without seeing the effect

100, 50

Felix is a hard-working college senior. One Thursday, he decides to work nonstop until he has answered 250 practice problems for his economics course. He starts work at 8:00 AM and uses a table to keep track of his progress throughout the day. He notices that as he gets tired, it takes him longer to solve each problem. Time Total Problems Answered 8:00 AM 0 9:00 AM 100 10:00 AM 175 11:00 AM 225 Noon 250 Use the table to answer the following questions. The marginal, or additional, gain from Felix's first hour of work, from 8:00 AM to 9:00 AM is (______), and the marginal gain from Felix's third hour of work, from 10:00 AM to 11:00 AM, is (_______).

Price Elasticity rule of thumb

Flatter curve=Higher Steeper curve=lower

((% Change in Qdemanded) / (% Change in Price))

Formula for Price Elasticity of Demand

Model

Highly simplified representation of a more complicated reality. -Used to study economic issues -i.e. Road map, model of human anatomy, model airplane

Who are the "actors" in the circular-flow diagram

Households and firms

Final goods and services

Households supply four basic types of resources. They include all of the following except

Less than $500

If the government places a $500 tax on luxury cars, the price paid by consumers will rise by...

A small change in an economy variable

In economics, the term "marginal" usually refers to

Suppose the demand for tacos decreases. What will happen to producer surplus in the market for tacos?

It decreases.

Scarcity

Limited nature of society's resources

What do economists mean when they state that a good is scarce?

The amount of the good that people would like exceeds the supply freely available from nature.

Marginal buyer

The buyer who would leave the market if price were any higher.

If the demand for a good increases, which of the following will generally occur in a market setting?

The quantity supplied will increase.

Marginal Seller

The seller who would leave the market if price were any lower.

False

True or False: If trade is good for a country, it must be good for everyone in the country.

Equality

When prosperity is distributed uniformly among society's members

Economics is best defined as the study of how: a. individuals decide to use scarce resources in an attempt to satisfy their unlimited wants. b. to run a business. c. the government should deal with unemployment and inflation. d. to eliminate the problem of scarce resources. e. individuals can make money.

Economics is the only social science and the only business discipline for which the Nobel Prize is awarded. a. True b. False

Goods and services are exchanged in: a. product markets. b. inventory markets. c. classified markets. d. resource markets. e. government markets.

Rent is the payment received by resource owners for the use of their natural resources. a. True b. False

Kim has two tickets to a concert tonight. She, however, has a headache and decides not to go. Which of the following would best fit Kim's needs?

a ticket service that will buy the tickets from her and resell them

In economics, money is an example of capital. a. True b. False

Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. The price elasticity of supply between $10 and $20 on the supply curve S is _____. a. infinity b. 1 c. 2 d. 10 e. 0

Microeconomics is the study of a. how money affects the economy. b. how individual households and firms make decisions. c. how government affects the economy. d. how the economy as a whole works.

b. how individual households and firms make decisions

Sean can build sandboxes twice as fast as Matt. Sean can assemble swing sets three times as fast as Matt. The law of comparative advantage suggests that

both can gain if Sean specializes in assembling swing sets and Matt in building sandboxes.

Retired persons travel by bus and automobile more frequently than do business executives, who more commonly use air travel. An economic explanation for this would be that

business executives value their time more highly

If the cross-price elasticity of demand is −3, then: a. one of the two goods is an inferior good b. the goods are unrelated. c. the goods are complements. d. one of the two goods is a luxury. e. the goods are substitutes

Which of the following is not a gain from division of labor? a. Workers' abilities are matched to tasks. b. The introduction of labor-saving machinery is possible. c. Workers' morale increases as tasks become more specialized. d. Workers gain experience from the repetition of the tasks. e. Workers save time by not moving to different tasks.

Which of the following would an economist classify as physical capital? a. A credit card b. 100 shares of Microsoft stock c. A lawyer's laptop d. A bauxite mine in Jamaica e. A $50 bill

Refer to Figure 2-1. Which arrow represents the flow of land, labor, and capital? a. A b. B c. C d. D

c. c

If Cross-Price Elasticity of Demand is less than zero, then

complements

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has

confused association and causation

In the figure given below that shows the demand for baby formula, which of the following changes will be caused by the discovery that breast milk provides more protection against a life threatening disease than baby formula? a. A movement along the demand curve D1 from point a to point b b. A shift in the demand curve from D1 to D2 c. A movement from point b on the demand curve D1 to point c on the demand curve D2 d. A shift in the demand curve from D2 to D1 e. A movement along the demand curve D2 from point d to point c

24. Chapter mc1mc11r, Section .05, Problem 111 For which of the following goods is the value of income elasticity most likely to be negative? a. Airline tickets. b. Toothpaste. c. Clothes. d. Champagne. e. Macaroni and cheese.

Sunk costs: a. can only be measured in monetary terms. b. lower the efficiency of production. c. are opportunity costs. d. should influence a person's choice if that person is a marginal decision maker. e. should not be considered when making economic decisions.

There are three consumers in the market for playing cards: Don, John, and Ron. At a price of $2 per pack, the quantities demanded by each are 3 packs, 2 packs, and 1 pack, respectively. At a price of $1.50 per pack, the quantities demanded by each are 4 packs, 5 packs, and 3 packs, respectively. Which of the following is true? a. At a price of $1 per pack, the quantity demanded in this market must be 20 packs. b. Don's behavior does not follow the law of demand. c. The price decrease causes Don's demand curve to shift more than that of John and Ron. d. The market demand curve for playing cards does not follow the law of demand. e. The decrease in price causes the quantity demanded in this market to increase by 6 packs.

The fallacy of composition is the incorrect view that

if something is true for an individual, then it must also be true for the group.

Economic theory

is all of the above.

The height of the supply curve at a quantity of 100 represents the

minimum price required to induce a producer to supply the hundredth unit.

Economists use the term ceteris paribus to indicate that

other things are assumed to be constant

ndicating whether an event will cause a movement along the supply curve for peanut butter or a shift of the supply curve for peanut butter::A decrease in the number of producers

shift

ndicating whether an event will cause a movement along the supply curve for peanut butter or a shift of the supply curve for peanut butter::An increase in the price of peanuts (used in the production of peanut butter)

shift

If the citizens of a country were to work harder and take less leisure time, it would

shift the production possibilities curve outward.

Propositions About Which Most Economists Agree

-A ceiling on rents reduces the quantity and quality of housing availble (93%) -Tariffs and import quotas usually reduce general economic welfare (93%) -The U.S. should not restrict employers from outsourcing work to foreign countries (90%) -The U.S. should eliminate agriculture subsidies (85%) -The gap between Social Security funds and expenditures will become unsustainably large within fifty years if current policies remain unchanged. (85%) -A large federal budget deficit has an adverse effect on the economy (83%) -A minimum wage increases unemployment among young and unskilled workers. (79%) Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings (78%)

Model

-A highly simplified representation of a more complicated reality -Economists use models to study economic issues

Perfectly Competitive Market

-All goods exactly the same -Buyers and sellers so numerous that no one can affect market price. (PRICE TAKER)

Perfectly Competitive Market

-All goods exactly the same -No one can affect market price - each is "price taker"

Firms in Circular-Flow Diagram

-Buy/hire factors of production, use them to produce goods and services -Sell goods and services

Demand Curve Shifter: Income

-Demand for a normal good is positively related to income -Increase in income causes increase in quantity demand at each price, shifts D curve to the right -Demand for an inferior good is negatively related to income. An increase in income shift D curves for inferior goods to the left

Why do Economists disagree

-Economists often give conflicting policy advice -They sometimes disagree about the validity of alternative positive theories about the world. -They may have different values and, therefore, different normative views about what policy should try to accomplish

Determinants of Price Elasticity of Demand

-Extent to which close substitutes are available -whether the good is a necessity or a luxury -How broadly or narrowly the good is defined -The time horizon-elasticity is higher in the long run than the short run

Elastic

-Greater than 1 - % Change in Quantity > % Change in Price

Determinants of Supply Elasticity

-How easy sellers can change Quantity Produced -Short run vs. long run (Greater in long run)

Society faces a short-run tradeoff between inflation and unemployment

-In the short-run (1-2 years), many economic policies push inflation and unemployment in opposite directions -Other factors can make this tradeoff more or less favorable, but the tradeoff is always present

Variables that can shift the demand curve

-Income (Normal-Positive vs. Inferior-Negative) -Price of related goods (Substitute-positive vs. Complement-Negative) -Tastes (i.e. increase in the number of consumers) -Expectations -Number of buyers *Curve shifts when there is a change in a relevant variable that is not measured on either axis

Variables that shift the supply curve

-Input Prices -Technology -Expectations -# of Sellers *Curve shifts when there is a change in a relevant variable that is not measured on either axis

Inelastic

-Less than 1 -% Change in Quantity < % Change in Price

Elasticity

-Measures how much one variable responds to changes in another variable -Def: Elasticity is a numerical measure of the reponsiveness of Qd or Qs to one of its determinants

Households in Circular-Flow diagram

-Own the factors of production, sell/rent them to firms for income -Buy and consume goods and services

Principles of decision making are

-People face tradeoffs -The cost of any action is measured in terms of foregone opportunities -Rational people make decision by comparing marginal costs and marginal benefits -People respond to incentives

Principles of the economy as a whole are:

-Productivity is the ultimate source of living standards -Money growth is the ultimate source of inflation -Society faces a short-run tradeoff between inflation and unemployment

Incentive

-Something that induces a person to act. Ex: the prospect of a reward or punishment. -Rational people respond to incentives

Rational People

-Systematically and purposefully do the best they can to achieve their objectives. -Make decisions by evaluating costs and benefits of marginal changes

Productivity

-The most important determinant of living standards -The amount of goods and services produced per unit of labor

Principles of interactions among people are

-Trade can be mutually beneficial -Markets are usually a good way of coordinating trade -Government can potentially improve market outcomes if there is a market failure or if the market outcome is inequitable

Identical products, as well as a large number of buyers and sellers, are characteristics of a _________ market. In such markets, sellers of goods _________ influence the prevailing market price, giving them the role of price _______ in the market.

-perfectly competitive -cannot -takers

Supply Curve Shifters

1. Input Prices 2. Technology 3. Number of Sellers 4. Expectations

Demand Curve Shifters

1. Number of buyers 2. Income 3. Prices of Related Goods 4. Tastes 5. Expectations

Households

1. Own factors of production, sell/rent to firms for income. 2. Buy and consume goods and services.

Refer to Table 2-1. Which of the following would be a mutually agreeable rate of exchange?

1F = 2C

Refer to Figure 2-10. If this economy put all available resources into the production of bananas, it could produce

400 bananas and no baseballs.

Supply Curve Shifter: Input Prices

A fall in input prices makes production more profitable at each output price, so firms supply a larger quantity at each price, and the S curve shifts to the right

Inferior Good

A good for which, other things being equal, an increase in income leads to a decrease in demand

Normal Good

A good for which, other things being equal, an increase in income leads to an increase in demand.

Production Possibilities Frontier

A graph that shows the combinations of two goods the economy can possibly produce given the available resources and the available technology

What does Interdependence and trade allow everyone to enjoy?

A greater quantity and variety of goods and services.

Market

A group of buyers and sellers (need not be in a single location)

Price Ceiling

A legal max on the price of a good or service.

Price Floor

A legal minimum on price of good or service.

A marginal change is one that _____

A marginal change is one that incrementally alters an existing plan.

Binding

A price ceiling below eq price is binding or not binding?

False

A price change causes the quantity demanded of a good to decrease by 30%, while the total revenue of that good increases by 15%. True or False: The demand curve is elastic in this region.

Economic Model

A simplified representation of some aspect of the economy.

Market Power

A single buyers or seller has substantial influence on market price (Ex: monopoly)

Demand Schedule

A table that shows the relationship between the price of a good and the quantity demanded

Supply Schedule

A table that shows the relationship between the price of a good and the quantity supplied

Circular-Flow Diagram

A visual model of the economy, shows how dollars flow through markets among households and firms

Economics is best defined as the study of A- how society manages its scarce resources. B- how to run a business most profitably. C- how to predict inflation, unemployment, and stock prices. D- how the government can stop the harm from unchecked self-interest.

A- Economics is best defined as the study of how society manages its scarce resources.

If a nation has high and persistent inflation, the most likely explanation is A- the central bank creating excessive amounts of money. B- unions bargaining for excessively high wages. C- the government imposing excessive levels of taxation. D- firms using their monopoly power to enforce excessive price hikes.

A- If a nation has high and persistent inflation, the most likely explanation is the central bank creating excessive amounts of money The usual suspect in cases of large or persistent inflation is growth in the quantity of money. When a government's central bank creates large quantities of money, the value of that money falls, causing prices to rise and resulting in inflation. See Section: Principle 9: Prices Rise When the Government Prints Too Much Money.

Which of the following is a positive, rather than a normative, statement?

A- Law X reduce national income Positive statements are descriptive; they make a claim about how the world is. However, normative statements are prescriptive; they make a claim about how the world ought to be.

Refer to Figure 3-17. When the price is P2, consumer surplus is

Refer to Figure 3-15. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

ABED

Comparative Advantage

Ability to produce a good at a lower opportunity cost than another producer

Comparative Advantage

Ability to produce a good at a lower opportunity cost than another producer. Formulas: -Time: Current/other -Production: Other/Current

Adam Smith's "invisible hand" refers to _______

Adam Smith's "invisible hand" refers to the ability of free markets to reach desirable outcomes, despite the self-interest of market participants.

Which of the following is true of resources?

All of the above are true.

Market Economy

Allocates resources through decentralized decisions of many households and firms as they interact in markets.

Total Surplus is Maximized

Allocation of resources is efficient if...

Consumer Surplus

Amount a buyer is willing to pay minus the amount buyer actually pays.

Quantity Demanded

Amount of good buyers are willing and able to purchase.

Quantity Demanded

Amount of the good that buyers are willing and able to purchase

Quantity Supplied

Amount seller is willing and able to sell.

Quantity Supplied

Amount that sellers are willing and able to sell

Simplifies reality in order to focus on its essential elements

An economic model

What is an Economic Model ?

An economic model is a simplified representation of some aspect of the economy.

Will shift the production possibilities frontier outward but not necessarily to a parallel position

An improvement in technology

Supply Curve Shifter: Number of Sellers

An increase in the number of sellers increases the quantity supplied at each price

Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold?

An increase in the price of grapes, an input to jelly

Demand Curve Shifters: Tastes`

Anything that causes a shift in tastes toward a good will increase demand for that good and shift its D curve to the right

Normative Statements

Attempt to describe how world should be. Cannot be confirmed or refuted. -Include opinions? -Economists = Policy Advisors

Positive Statements

Attempt to describe the world as it is. Can be confirmed or refuted. -Economists = Scientists

Positive Statement

Attempt to describe the world as it is. They can be confirmed or refuted/

Normative Statement

Attempt to prescribe how the world should be

Match each term with the correct part of the graph.

B,A,C

The circular-flow diagram illustrates that, in markets for the factors of production, A- households are sellers, and firms are buyers. B- households are buyers, and firms are sellers. C- households and firms are both buyers. D- households and firms are both sellers.

B- households are sellers, and firms are buyers.

Refer to Figure 3-18. Which area represents the increase in consumer surplus when the price falls from P1 to P2?

BCFD

b. Decrease

Bagels and cream cheese are often eaten together, they are complements. If the price of bagels increases, what likely happen to the demand for cheese?

Your opportunity cost of going to a movie is A- the price of the ticket. B- the price of the ticket plus the cost of any soda and popcorn you buy at the theater. C- the total cash expenditure needed to go to the movie plus the value of your time. D- zero, as long as you enjoy the movie and consider it a worthwhile use of time and money.

C- Your opportunity cost of going to a movie is the total cash expenditure needed to go to the movie plus the value of your time.

c. Positive, Normative

Categorize each of these statements as either positive or normative: Breast cancer is the fifth most common cause of cancer death ________. The government should force doctors to encourage women aged 60 to 69 to be screened for breast cancer _________

All choices have opportunity cost

Charles is training for a triathlon, a timed race that combines swimming, biking, and running. Each hour he spends swimming is an hour that he can't spend biking or running. Which basic principle of individual choice does this sentence best illustrate?

Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000 hours of labor, while producing a shirt takes 4 hours of labor.

China will export shirts, while the United States will export aircraft.

Law of Demand

Claim that the quantity demanded of a good falls when the price of the good rise , other things equal (downward sloping)

Law of Demand

Claim that the quantity demanded of a good falls when the price of the good rises, other things equal

Law of Supply

Claim that the quantity supplied of a good rises when the price of the good rises, other things equal

Equilibrium quantities increases unambiguously, while equilibrium price change ambiguously

Consider the market for pens. Suppose that the number of students with an allergy to pencil erasers increases, causing more students to switch from pencils to pens in school. Moreover, the price of ink, an important input in pen production, has dropped considerably. Indicate the effect these two events have on the equilibrium quantities of the market for pens.

Supply Curve Shifters: Technology

Cost- Saving technological improvement has the same effect as a fall in input prices, shifts S curve to the right

((% Change in Qdemanded of good 1) / (% Change in price of good 2)) -Positive = Substitute -Negative = Complement

Cross - Price Elasticity of Demand -Positive = ? -Negative = ?

Governments may intervene in a market economy in order to A- protect property rights. B- correct a market failure due to externalities. C- achieve a more equal distribution of income. D- All of the above.

D- Governments may intervene in a market economy in order to protect property rights, correct a market failure due to externalities, achieve a more equal distribution of income.

A graphical object showing the relationship between the price of a good and the amount of the good that buyers are willing and able to purchase at various prices

Demand Curve

A table showing the relationship between the price of a good and the amount that buyers are willing and able to purchase at various prices

Demand Schedule

Scientific Method

Dispassionate development and testing of theories about how the world works.

What does productivity depend on?

Equipment, skills, and technology available to workers

Causes of Market Failure

Externalities and Market Power

A Market is

Facilitates exchange between buyers and sellers

True or False: The market for digital cable does exhibit the two primary characteristics that define perfectly competitive markets.

False

True or False: When both demand and supply curves shift, the curve that shifts with smaller magnitude determines effect on undetermined equilibrium object

False

True or False: When both the demand and supply curve shift, you can always determine the effect on price and quantity without knowing the magnitude of the shifts.

False

Society faces a tradeoff

Getting more of one good requires sacrificing some of the other

Efficiency

Goods are consumed by buyers who value them most highly. Goods are produced by producers with lowest costs. Raising or lowering quantity of good would not increase total surplus.

Imports

Goods produced abroad and sold domestically

Exports

Goods produced domestically and sold abroad

Imports

Goods produces abroad and sold domestically.

Promote Equity

Government may alter market outcome to promote equity

Production Possibilities Frontier (PPF)

Graph showing the combinations of 2 goods economy can possibly produce given available resources and available technology.

Market

Group of buyers and sellers of a particular product

Overall increase in production for both parties and they will obtain consumption outside the PPF

Happens when two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage.

If a surplus exists in the hamburger market, then the current price must be (higher/lower) than the equilibrium price. For the market to reach equilibrium, you would expect (sellers to offer lower prices/buyers to offer higher prices)

Higher and sellers to offer lower prices

Price Elasticity: luxuries vs. necessities

Higher for luxuries

Price Elasticity: Long run vs. short run

Higher in long run

lower, buyer, higher

If a storage exists in the car market the current price must be _____________ than the equilibrium price. For the market to reach equilibrium, you would expect ___________ to offer __________ prices.

Which of the following is most consistent with economizing behavior?

If you get the same satisfaction from a chicken sandwich and a salad, you should purchase the one that costs the least.

Enforce Property Rights

Important role for government

((% Change in Qdemanded) / (% Change in income)) -Positive = Normal Good -Negative = Inferior Good

Income Elasticity of Demand Formula -Positive = ? -Negative = ?

Demand Curve Shifter: # of Buyers

Increase in number of buyers increases quantity demanded at each price, shifts D curve to right

Inflation

Increases in general level of prices

Marginal Changes

Incremental adjustments to an existing plan.

Long-Run Inflation

Inflation is almost always caused by excessive growth in quantity of money, which causes the value of money to fall

Price Elasticity for narrowly defined goods

It is higher than for broadly defined ones

John is selling his pizza for $6 per slice in an area of high demand. However, customers are not buying his pizza. Using what you learned about the principles of equilibrium, write three to four sentences about how John could solve his problem.

John's prices are too high. This is causing excess supply: John's workers can make many pizzas, but at these high prices, consumers are only demanding a small amount. If the price per slice decreased, consumers would demand more of John's pizza. This means that business would move toward a point of equilibrium, where supply matches demand at the appropriate price.

The claim that, with other things being equal, the quantity demanded of a good falls when the price of that good rises

Law of Demand

What are the two markets in the circular-flow diagram?

Market for goods and services and market for factors of production

Willingness to Pay (WTP)

Max amount buyer will pay for good. Measures how much the buyer values the good.

Price Elasticity of Demand

Measures how much Qd responds to a change in P

((Q2-Q1) / (Average of Q) / (P2 - P1) / (Average of P))

Midpoint Formula

Indicate whether an event will cause a movement along the demand curve for hot dogs or a shift of the demand curve for hot dogs::: A decrease in the price of hot dogs

Movement along the Demand Curve

Movement along the PPF

Movement along the PPF or Shift? -Change in consumer preferences.

Shift

Movement along the PPF or Shift? -Technological advancement in a specific product.

Positive or Normative: A tax cut is needed to stimulate the economy.

Normative because it is a value judgement

Positive or Normative: The government should print less money

Normative because this is a value judgement, cannot be confirmed or refuted

Points above PPF

Not possible

Elasticity

Numerical measure of the responsiveness of Quantity demanded or Quantity Supplied to one of its determinants

Competitive Market

One with many buyers and sellers, each has a negligible effect on price

Competitive market

One with many buyers and sellers, each has a negligible effect on price

For PPF, if opportunity cost remains constant, then

PPF is a straight line

For PPF, if opportunity cost of a good rises as more of the good is produced, then

PPF is bow-shaped

Income Elasticity of Demand

Percent change in Qd/Percent change in income

Positive or Normative: Prices rise when the government increases the quantity of money

Positive because it describes a relationship, could used data to confirm or refute

Positive or Normative: An increase in the price of burritos will cause an increase in consumer demand for music downloads

Positive because it describes a relationship.

Points on PPF

Possible and efficient (all resources are fully utilized)

Points under PPF

Possible and not efficient

-Close Substitutes are available -Narrowly defined goods -Luxuries -Demand Curve is flatter

Price Elasticity is higher when...

((% Change in Qsupplied) / (% Change in Price))

Price Elasticity of Supply Formula

Price Elasticity example

Price elasticity is higher when close substitutes are available

If the economy goes into a recession and incomes fall, what happens in the markets for inferior goods?

Prices and quantities both rise.

Which of the following is true of private ownership?

Private ownership links responsibility with the right of control.

positive but less than the marginal seller's cost.

Producing a quantity larger than the equilibrium of supply and demand is inefficient because the marginal buyer's willingness to pay is...

Promoting Efficiency

Public policy may promote efficiency

The amount of a good that buyers are willing and able to purchase at a given price

Quantity Demanded

Law of Supply

Quantity supplied rises when price of good rises (Upward Sloping)

Making decision aimed at achieving some predetermined goal.

Rational choice by an individual implies

Price and Total Revenue are inversely related

Relationship between price and total revenue when demand is ELASTIC

Price and Total Revenue are directly related

Relationship between price and total revenue when demand is INELASTIC

Total Revenue remains constant when price changes

Relationship between price and total revenue when demand is UNIT ELASTIC

Factors of Production

Resources the economy uses to produce goods and services including: labor, land, capital (buildings and machines used in production)

Economists play what two roles?

Scientists and policy advisors

INdicate whether an event will cause a movement along the demand curve for hot dogs or a shift of the demand curve for hot dogs::::An increase in income of consumers

Shift of the D curve

Indicate whether an event will cause a movement along the demand curve for hot dogs or a shift of the demand curve for hot dogs:::: A decrease in the number of consumers

Shift of the D curve

Moving along a PPF

Shifting resources from the production of one good to other

Supply is a powerful force in a free market. In two to three sentences, explain some of the factors that cause shifts in supply and what effects these shifts may have.

Shifts in supply occur when the amount of goods available increases or decreases. Shifts in supply can happen when prices change, when competitors produce similar goods, or when the availability of labor or resources changes.

Assumptions

Simplify the complex world, make it easier to understand

Welfare Economics

Studies how the allocation of resources affects economic well-being.

Macro

Study of economy-wide phenomena, including inflation, unemployment, and economic growth

Macroeconomics

Study of economy-wide phenomena, including inflation, unemployment, and economics growth.

Micro

Study of how households and firms make decisions an how they interact in markets

Microeconomics

Study of how households and firms make decisions and how they interact in markets.

If Cross-Price Elasticity of Demand is greater than zero, then

Substitutes

Market Demand

Sum of quantities demanded by all buyers at each price

Market Supply

Sum of quantity supplied by all sellers at each price.

Market Demand

Sum of the quantities demanded by all buyers at each price.

Supply Schedule

Table showing the relationship between price of good and quantity supplied

Demand Schedule

Table that shows the relationship between price of a good and Qdemanded.

Slope of PPF

Tells you the opportunity cost of one good in terms of the other -Consider lowest opportunity cost.

What does slope of the PPF tell you?

Tells you the opportunity cost of one good in terms of the other.

The supply curve is more elastic

The ability of firms to enter and exit a market over time means that, in the long run,

Producer Surplus

The amount a seller is paid for a good minus the seller's cost.

Law of demand

The claim that, with other things being equal, the quantity demanded of a good falls when the price of that good rises refers to quantity, curve, schedule, law.

Movie tickets and film streaming services are substitutes. If the price of film streaming increases, what happens in the market for movie tickets?

The demand curve shifts to the right.

Scientific Method

The dispassionate development and testing of theories about how the world works

How to increase inflation rate?

The faster the government creates money

A change in which of the following will not shift the demand curve for hamburgers?

The price of hamburgers

Factors of Production

The resources the economy uses to produce goods and services. - i.e. Land, Labor, and Capital (buildings and machines used in production)

b. Price of inputs and technology change c. Number of producers and expectations or producers e. b and C

The shifters of the supply curve are:

Economics

The study of how society manages its scarce resources -How much people decided what to buy, how much to work, save, and spend -How firms decide how much to produce, how many workers to hire -how society decides how to divide its resources between national defense, consumer goods, protecting the environment, and other needs

1 hour working in problems, 3 hours reading

The teaching assistant in Felix's economics course gives him some advice. "Based on past experience," the teaching assistant says, "working on 100 problems raises a student's exam score by about the same amount as reading the textbook for 1 hour." For simplicity, assume students always cover the same number of pages during each hour they spend reading. Given this information, in order to use his 4 hours of study time to get the best exam score possible, how many hours should he have spent working on problems, and how many should he have spent reading

Kayla can cook dinner in 30 minutes and wash the laundry in 20 minutes. Her roommate takes half as long to do each task. How should the roommates allocate the work?

There are no gains from trade in this situation.

What do prices do in market economies?

They are signals that guide economic decisions and allocate scarce resources

Price Floor Binding

This will cause a surplus in labor (unemployment). This illegal.

Tradeoff

To achieve greater equality, could redistribute income from wealthy to poor. But this reduces incentive to work and produce, shrinks size of economic "pie".

Value to buyers - Cost to seller CS + PS

Total Surplus Formula

PPF illustrates the concepts of:

Tradeoff and opportunity cost, efficiency and inefficiency, unemployment, and economic growth.

True or False: If the actual price in this market were below the equilibrium price, suppliers could raise the price without losing sales.

True

False

True or False: An increase in the demand for notebooks raises the quantity of notebooks demanded but not the quantity supplied.

True

True or False: If the price is above the max willingness to pay then, he/she will not purchase it (zero consumer surplus)

True

True or False: Price Elasticity of Supply is more elastic in the long-run

False

True or False: Price ceiling set above equilibrium (non-binding) will effect equilibrium price and quantity.

True

True or False: The size of the effect on employment depends only on the elasticity of demand.

True

True or False: The size of the effect on unemployment depends on the elasticity of demand and the elasticity of supply.

True

True or False: Value of the price elasticity of demand is not equal to the slope of the demand curve

False

True or False: When both the demand and supply curve shift, the curve that shifts with the smaller magnitude determines the effect on the undetermined equilibrium object.

False

True or False: When both the demand and supply curve shift, you can always determine the effect on price and quantity without knowing the magnitude of the shifts.

False

True or False: When the demand curve and the supply curve shift in the direction previously indicated, the effect on the equilibrium price is clear even without knowing the magnitude of the shifts.

True

True or False: With binding constraint, supply and demand are more price-elastic. Therefore, the shortage is larger.

Scientists

Try to explain the world

Policy advisors

Try to improve it

Demand Curve Shifter: Prices of Related Goods

Two goods are substitutes causes an increase in demand for the other. Two goods are complements if an increase in the price of one causes a fall in demand for the other

Substitutes

Two goods for which an increase in price of one leads to an increase in the demand for the other

Complements

Two goods for which an increase in the price of one leads to a decrease in the demand for the other

Once again, in an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3 cars or mow 1 lawn. Who has the comparative advantage in car washing, and who has the comparative advantage in lawn mowing?

Tyler in washing, Mateo in mowing.

In an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3 cars or mow 1 lawn. Who has the absolute advantage in car washing, and who has the absolute advantage in lawn mowing?

Tyler in washing, neither in mowing.

Cost

Value of everything a seller must give up to produce a good (i.e. opportunity cost).

Circular - Flow Diagram

Visual model of economy, shows how dollars flow through markets among households and firms.

Bow Shaped

What does the PPF look like when there is increasing opportunity cost? May be cause by: -Different workers have different skills -Different opportunity costs of producing one good in terms of other -Other resource or mix of resource with varying opportunity costs

Opportunity Cost

What must be given up to obtain that item

Demand: -Upper Portion = Elastic -Lower Portion = Inelastic Supply: -Upper Portion = Inelastic -Lower Portion = Elastic

What parts of the demand and supply curve is elastic and inelastic?

Opportunity Cost

Whatever must be given up to obtain it

In the sample scenario, what does this mean about the elasticity of wheat in relation to supply?

Wheat is elastic.

supply is elastic, and demand is inelastic.

When a good is taxed, the burden of the tax falls mainly on consumers if

Efficiency

When society gets the most from its scarce resources

Market Failure

When the market fails to allocate society's resources efficiently.

Externalities

When the production or consumption of a good affects bystanders. (Ex: pollution)

Those goods in which other nations have a comparative advantage.

Which goods will a nation typically import?

Beethoven - Narrower Market

Which is more elastic? : Beethoven recordings or classical music recordings

9, 22

You work as an assistant coach on the university basketball team and earn $13 per hour. One day, you decide to skip the hour-long practice and go to the county fair instead, which has an admission fee of $9. The the opportunity cost of time is _____ , while the total cost (valued in dollars) of skipping practice and going to the fair is ____

Hans can do 4 loads of laundry per hour, and he can type 6 pages per hour. Maria can do 12 loads of laundry per hour, and she can type 8 pages per hour. Hans and Maria would both be better off if: a. Hans specialized in typing and Maria in doing laundry, trading with each other for the other service. b. Hans did all of the typing and all of the laundry. c. each did their own laundry and typing. d. Maria did all of the typing and all of the laundry. e. Hans specialized in doing laundry and Maria in typing, trading with each other for the other service.

Identify a statement that is true about a linear demand curve. a. Along a linear demand curve, the slope is constant, but the price elasticity varies. b. Along a linear demand curve, total revenues are constant. c. Along a linear demand curve, both the slope and price elasticity are constant. d. Along a linear demand curve, the price elasticity is constant, but the slope varies. e. Along a linear demand curve, total revenues are negative.

If Monica has a comparative advantage in baking and George has a comparative advantage in sewing, then: a. we can conclude nothing about absolute advantage. b. George must have an absolute advantage in baking. c. George must have an absolute advantage in sewing. d. Monica must have an absolute advantage in sewing. e. Monica must have an absolute advantage in baking.

Sugar and honey are viewed as substitutes for each other in many cooking applications. If the price of sugar rises, we would expect: a. the demand for honey to increase. b. the quantity demanded of honey to decrease. c. the price of honey to decrease. d. the demand for honey to decrease. e. the quantity demanded of honey to increase.

Which form of business organization is the most common in the United States? a. Sole proprietorship b. Partnership c. S corporation d. Corporation e. Nonprofit organization

If the cross-price elasticity of demand between Good x and Good y is 0.4, then: a. a 10 percent decrease in the price of good y leads to a 4 percent decrease in the demand for good y. b. the demand for good x is highly responsive to changes in the price of good y. c. good x is a normal good and good y is an inferior good. d. a 10 percent increase in the price of good y leads to a 0.4 percent increase in the quantity demanded of good x. e. good x and good y are complements.

"An increase in the price of a product causes consumers to purchase more of that product" is an example of a positive economic statement. a. True b. False

A 5 percent increase in income leads to a 10 percent increase in the quantity demanded for a service. This service is a(n) _____ good, and the demand is _____. a. normal; elastic b. inferior; inelastic c. normal; unit elastic d. normal; inelastic e. inferior; elastic

A perfectly elastic demand curve is: a. a horizontal straight line. b. an upward-sloping straight line. c. a downward-sloping straight line. d. u-shaped. e. a vertical straight line.

A point outside the production possibilities frontier: a. cannot be reached using the available technology. b. represents unemployment of resources. c. would not represent an efficient combination of goods. d. is less desirable than one that lies inside the frontier. e. represents full employment of resources.

A tax is said to be progressive if: a. the proportion of income paid as taxes increases as income increases. b. the proceeds are used to pay for liberal political programs. c. the absolute size of the tax (in dollars) increases as income increases. d. the average tax rate falls as income rises. e. the wealthy pay a smaller percentage of their income than the poor.

A university administration's decision to raise tuition in order to increase revenue will be successful if: a. demand is inelastic. b. the demand curve slopes downward. c. supply is inelastic d. supply is elastic. e. demand is elastic.

Along a linear demand curve, as the price increases from zero: a. total revenue first increases but eventually decreases. b. quantity demanded increases. c. demand decreases. d. total revenue first decreases but eventually increases. e. demand increases.

As price decreases along a linear demand curve, the price elasticity of demand decreases. a. True b. False

As resources are not perfectly adaptable to the production of both Good A and Good B, _____. a. the opportunity cost of Good A increases as the production of Good A increases. b. the opportunity cost of Good B is constant. c. the opportunity cost of Good A decreases as the production of Good A increases. d. it is impossible for the economy to produce both Good A and Good B. e. the opportunity cost of Good A is constant.

Economic decision makers will continue to acquire information only as long as the expected additional benefit exceeds the expected additional cost of the information. a. True b. False

If Good B is a complement to Good A, then a decrease in the price of Good B: a. increases the demand for Good A. b. will cause the demand for Good B to increase. c. decreases the demand for Good A. d. increases the quantity demanded of Good A. e. decreases the quantity demanded of Good A.

If Helen can paint one room in the time it takes her to bake 40 cakes and Josh can paint one room in the time it takes him to bake 60 cakes, Helen's opportunity cost of baking one cake is: a. painting 1/40 of a room. b. painting 2/3 of a room. c. painting 1/60 of a room. d. painting 3/2 of a room. e. painting one room.

If a 5 percent increase in price leads to an 8 percent decrease in quantity demanded, demand is: a. elastic. b. inelastic. c. perfectly elastic. d. perfectly inelastic. e. unit elastic.

If the price elasticity of demand is −0.5, then a: a. 1 percent decrease in price leads to a 0.5 percent increase in quantity demanded. b. 50 percent decrease in price leads to a 1 percent increase in quantity demanded. c. 50 percent decrease in quantity demanded leads to a 1 percent decrease in price. d. 1 percent decrease in quantity demanded leads to a 0.5 percent decrease in price. e. 50 percent decrease in price leads to a 100 percent increase in quantity demanded.

If the price of Pepsi-Cola increases from 40 cents to 50 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the value of the price elasticity of demand for Pepsi-Cola is: a. −3. b. −2. c. −0.25. d. −1. e. −0.5.

If the price of potato chips increases, other things constant, demand for potato chip dip will: a. decrease because the goods are complements. b. decrease because the goods are substitutes. c. decrease because potato chip is an inferior good. d. increase because the goods are complements. e. increase because the goods are substitutes.

In a circular-flow model, households supply all of the following except: a. goods and services. b. labor. c. entrepreneurial ability. d. natural resources. e. capital.

Jennifer expects the price of CDs to go up by 10 percent next week. Which of these is most likely to result from such an expectation? a. Jennifer's demand for CDs will increase during this week. b. Jennifer's demand for CD players will increase during the following week. c. Jennifer's demand for CDs will increase during the following week. d. Jennifer's demand for CD players will decrease during this week. e. Jennifer's demand for CDs will decrease during this week.

On a given production possibilities frontier, which of the following is not assumed to be fixed? a. Production of each item b. The amount of capital available c. The level of technology d. The amount of land and natural resources available e. The amount of labor available

The assumption of rational self-interest does not rule out the possibility of concern for other individuals. a. True b. False

The assumption that individuals act rationally implies that: a. people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile. b. the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that deed. c. people only consider the costs of an activity to decide whether it is worthwhile. d. people undertake all those activities that yield benefits to themselves. e. people think only of themselves and disregard the well-being of others.

The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, which of the following points represents an inefficient use of the economy's resources? a. f. b. h. c. e. d. i. e. d.

Which change is illustrated by the shift taking place on this graph

a decrease in supply

Refer to Table 3-1. For the rancher, the opportunity cost of 1 pound of meat is a. 0.4 pound of potatoes. b. 2.5 pounds of potatoes. c. 4 pounds of potatoes. d. 10 pounds of potatoes

a. 0.4 pound of potatoes

Refer to Figure 3-7. If Bintu and Juba switch from each person dividing her time equally between the production of cups and bowls to each person spending all of her time producing the good in which she has a comparative advantage, then total production will increase by a. 1 bowl and 1 cup. b. 2 bowls and 4 cups. c. 3 bowls and 5 cups. d. 4 bowls and 8 cups.

a. 1 bowl and 1 cup

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 chair is a. 1/5 table for Mike and 1/3 table for Sandy. b. 1/5 table for Mike and 3 tables for Sandy. c. 5 tables for Mike and 1/3 table for Sandy. d. 5 tables for Mike and 3 tables for Sandy.

a. 1/5 table for Mine and 1/3 table for Sandy

Refer to Table 3-7 Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. Assume that Japan and Korea each has 2400 hours available. Originally, each country divided its time equally between the production of cars and airplanes. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of cars increased by a. 16. b. 40. c. 64. d. 80

a. 16

Refer to Figure 3-3. Without trade, Arturo produced and consumed 240 tacos and 120 burritos and Dina produced and consumed 100 tacos and 150 burritos. Then, each person agreed to specialize in the production of the good in which they have a comparative advantage and trade 260 tacos for 156 burritos. As a result, Arturo gained a. 20 tacos and 24 burritos and Dina gained 40 tacos and 6 burritos. b. 20 tacos and 36 burritos and Dina gained 160 tacos and 6 burritos. c. 260 tacos and 144 burritos and Dina gained 140 tacos and 156 burritos. d. 260 tacos and 156 burritos and Dina gained 260 tacos and 156 burritos.

a. 20 tacos and 24 burritos and Dina gained 40 tacos and 6 burritos

Refer to Figure 3-9. If Uzbekistan and Azerbaijan switch from each country dividing its time equally between the production of bolts and nails to each country spending all of its time producing the good in which it has a comparative advantage, then total production will increase by a. 5 bolts and 10 nails. b. 15 bolts and 40 nails. c. 20 bolts and 50 nails. d. 30 bolts and 80 nails.

a. 5 bolts and 10 nails

Refer to Table 3-3 Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. Which of the following combinations of toothbrushes and hairbrushes could Zimbabwe not produce in 120 minutes? a. 5 toothbrushes and 11 hairbrushes b. 10 toothbrushes and 9 hairbrushes c. 20 toothbrushes and 6 hairbrushes d. 30 toothbrushes and 3 hairbrushes

a. 5 toothbrushes and 11 hairbrushes

Refer to Figure 2-9, Panel (a). In order to gain 2 printers by moving from point C to point D, society must sacrifice a. 6 computers. b. employment. c. efficiency. d. More than one of the above is correct.

a. 6 computers

The term "invisible hand" was coined by a. Adam Smith. b. David Ricardo. c. Karl Marx. d. Benjamin Franklin

a. Adam Smith

The term market failure refers to a. a situation in which the market on its own fails to allocate resources efficiently. b. an unsuccessful advertising campaign which reduces demand for a product. c. a situation in which competition among firms becomes ruthless. d. a firm which is forced out of business because of losses.

a. a situation in which the market on its own fails to allocate resources efficiently

To promote good economic outcomes, policymakers should strive to enact policies that a. enhance productivity. b. enhance individuals' market power. c. result in a rapidly-growing quantity of money. d. All of the above are correct.

a. enhance productivity

When an economist is asked a question like "why is unemployment higher for teenagers than for older workers?" the economist a. is asked to explain the cause of an economic event. b. is asked to recommend a policy to improve economic outcomes. c. is asked as a policy adviser. d. does not have enough information to respond.

a. is asked to explain the cause of an economic event

What you give up to obtain an item is called your a. opportunity cost. b. explicit cost. c. monetary cost. d. direct cost.

a. opportunity cost

The point where both x and y are zero is known as the a. origin. b. null. c. zero coordinate. d. center.

a. orgin

The circular-flow diagram is a a. visual model of the economy. b. visual model of the relationships among money, prices, and businesses. c. model that shows the effects of government on the economy. d. mathematical model of how the economy works.

a. visual model of the economy

Based on the information presented in the scenario, which factor is affecting the supply created by the furniture company?

ability to produce

Which of the following would allow the production possibilities curve for an economy to shift outward?

all of the above

In Figure 2-11, which shows the production possibilities curve,

all of the above are true

When economists use the term ceteris paribus, they indicate

all other factors are assumed to be constant.

Which of the following will most likely shift the production possibilities curve for breadfruit and fish outward from AA to BB in Figure 2-6?

an improvement in the form of economic organization

Which of the following would reduce the price of DVD players and increase the quantity sold?

an increase in the supply of DVD players

A fact based on observable phenomenon that is not influenced by differences in personal opinion is called

an objective concept.

The economic way of thinking stresses that

as the cost of an option increases, people will be less likely to choose that option.

25. Chapter mc1mc11r, Section .04, Problem 083 The table given below shows the quantity supplied and the quantity demanded for a good at different prices. If the price of the good described in the table given below is $1.60, then there is a: a. shortage of 30 units. b. surplus of 30 units. c. surplus of 10 units. d. shortage of 20 units. e. surplus of 20 units.

A normative economic statement: a. is a statement of fact. b. is a statement of what ought to be, not what is. c. indicates what will occur if certain assumptions are true. d. enables economists to test hypotheses. e. is a hypothesis used to test economic theory.

Hans can do 4 loads of laundry per hour, and he can type 6 pages per hour. Maria can do 12 loads of laundry per hour, and she can type 8 pages per hour. Maria's opportunity cost of typing one page is: a. 6 loads of laundry. b. 3/2 of a load of laundry. c. 2/3 of a load of laundry. d. 4 loads of laundry. e. impossible to compute without additional information.

Opportunity cost is defined as the: a. value of all alternatives not chosen. b. value of the best alternative not chosen. c. dollar cost of what is purchased. d. difference between the benefits from a choice and the benefits from the next best alternative. e. difference between the benefits from a choice and the costs of that choice.

To say that people make decisions at the margin means that: a. if given a choice, most people would prefer to make their own decisions concerning the things that affect their lives. b. they weigh the additional costs and the additional benefits of various activities before they make a decision. c. they usually wait until the last minute before making a decision to buy. d. most people just barely get by on the incomes they earn and live from day-to-day on the very edge of subsistence. e. they consider the total cost and the total benefit of various activities before they make a purchase.

Which of the following is an example of a normative economic statement? a. Incomes increase when national production increases. b. Women should earn the same income as men. c. The more time you spend studying for chemistry, the higher your economics test score will be. d. When the price of a good rises, people will buy more of it. e. The more time you spend studying, the higher your economics test scores will be.

A tariff is: a. a legal limit on quantities of goods that can be imported. b. a tax on imports. c. a subsidy for exports. d. a voluntary limit on quantities of goods that can be imported. e. a quality restriction on imports.

Along a bowed-out production possibilities frontier, as more of one good is produced, _____. a. the opportunity cost of producing both goods must remain constant b. technology remains constant c. the opportunity cost of producing that good decreases d. efficiency decreases e. the opportunity cost of producing that good remains constant

As consumers have a longer time period to respond, the demand for a product typically becomes more inelastic. a. True b. False

Barter occurs when: a. goods are used to buy money. b. one product is exchanged directly for another product. c. money is used to buy goods. d. two people share everything. e. money is exchanged directly for other money.

College graduates with history or literature as their major tend to earn more than those who choose more quantitative disciplines like economics. a. True b. False

Consider a system in which a person earning $10,000 pays $1,000 in taxes, a person earning $25,000 pays $2,000, and someone earning $60,000 pays $4,000. This is an example of: a. proportional taxation. b. regressive taxation. c. progressive taxation. d. a tax based on the benefits-principle of taxation. e. a property tax.

Demand is more elastic: a. for necessities than for luxuries. b. for goods with many substitutes than for goods with only a few. c. for goods with no substitutes. d. for broadly defined goods than for narrowly defined ones. e. in the short run than in the long run.

Figure 5.1 shows the demand curve for a firm. In the figure below, the total revenue at point a is _____. a. $4 b. $50 c. $5 d. $10 e. $100

Figure 5.5 shows the total revenue curve for a firm. Which of the following statements is true at a quantity of 10? a. Demand is inelastic. b. Demand is unit elastic. c. Demand is elastic. d. Demand is perfectly inelastic. e. Demand is perfectly elastic.

If an increase in price from $1.20 to $2 per unit leads to an increase in quantity supplied from 20 to 100 units, then: a. supply is inelastic. b. supply is elastic. c. supply is perfectly inelastic. d. supply is perfectly elastic. e. supply is unit elastic.

If the production possibilities frontier is a straight line, _____. a. resources must not be used efficiently b. resources must be equally adaptable at producing either product c. resources must be unemployed d. society must not be using the latest technology e. its slope will equal −1

It is always rational to acquire more information before making a decision. a. True b. False

Profit is the payment received by resource owners for the use of their capital. a. True b. False

Suppose you have purchased a nonrefundable plane ticket and, at the last moment, cannot take the trip. You can, however, sell the ticket. If you paid $700 for the ticket, the cost of sending the ticket to someone through overnight mail is $20, and you spend $10 on a courier to get the ticket to the post office for overnight delivery, what is the minimum you should accept for the ticket? a. $720 because that is the cost of the ticket and of getting it to the buyer b. $30 because the $700 is a sunk cost c. $700 because that is what the ticket cost d. More than $730, so that you can make a profit e. $730 because that is the total cost of the ticket and getting it to the buyer

The figure given below shows the production possibilities frontier for education and food. In The opportunity cost of moving from point c to point b is _____. a. 12 units of education b. 22 units of education c. 3 units of food d. 62 units of education e. 1 unit of food

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