Final
If a 15% increase in price for a good results in a 20 percent decrease in quantity demanded, the price elasticity of demand is
1.33
Refer to Figure 4-5. If these are the only two sellers in the market, then the market quantity supplied at a price of $4 is
14 units
Refer to Table 6-1. How many units of the good are purchased after the imposition of the price floor?
5
"Minimum wage laws result in unemployment" is a normative statement, while "the minimum wage should be higher" is a positive statement.
False
Positive statements are descriptive, while normative statements are prescriptive.
True
Which of the following would shift the supply of Green Bay Packers football jerseys to the left?
The cost of the fabric used to make the jerseys increases.
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
Which of the following would cause a demand curve for a good to be price inelastic?
The good is a necessity.
Suppose the equilibrium price for apartments is $800 per month and the government imposes rent controls of $500. Which of the following is unlikely to occur as a result of the rent controls?
The quality of apartments will improve.
Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which results in an increase in drunk driving. This illustrates the principle that people respond to incentives.
True
Refer to Figure 6-5. Which of the following statements is not correct?
When the price is $6, there is a surplus of 8 units.
Which of the following shifts the supply curve for pizza to the right?
a decrease in the price of cheese, an input to pizza
A group of buyers and sellers of a particular good or service is called
a market.
The term market failure refers to
a situation in which the market on its own fails to allocate resources efficiently.
Refer to Figure 6-4 . In graph (b), there will be
a surplus.
Which of the following will shift the demand curve for pizza to the right?
an increase in the price of hamburgers, a substitute for pizza
If the income elasticity of demand for a good is negative, it must be
an inferior good
Refer to Figure 6-9. In this market, a minimum wage of $7.00 is
binding and creates unemployment.
Making rational decisions at the margin means that people
compare the marginal costs and marginal benefits of each decision
If the cross-price elasticity between two goods is negative, the two goods are likely to be
complements.
The line that relates the price of a good and the quantity demanded of that good is called the demand
curve, and it usually slopes downward.
In a market with a binding price ceiling, increasing the ceiling price will
decrease the shortage.
The law of demand states that, other things equal, when the price of a good
falls, the quantity demanded of the good rises.
Refer to Figure 6-1. A binding price ceiling is shown in
graph (b) only.
The "invisible hand" refers to
how the decisions of households and firms lead to desirable market outcomes
If the government removes a binding price ceiling from a market, then the price paid by buyers will
increase, and the quantity sold in the market will increase.
Refer to Figure 6-1. The price ceiling shown in graph (a)
is not binding.
If supply is price inelastic, the value of the price elasticity of supply must be
less than 1.
Goods with many close substitutes tend to have
more elastic demands.
A competitive market is a market in which
no individual buyer or seller has any significant impact on the market price.
Where can an economy not produce?
outside its production possibilities frontier
The production possibilities frontier provides an illustration of the principle that
people face trade-offs
A demand schedule is a table that shows the relationship between
price and quantity demanded.
In general, a flatter demand curve is more likely to be
price elastic.
In general, a steeper supply curve is more likely to be
price inelastic
What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?
scarcity
Refer to Figure 6-9. In this market, a minimum wage of $7.00 creates a labor
surplus of 4,000 worker hours
For a good that is a luxury, demand
tends to be elastic
The bowed-outward shape of the production possibilities frontier can be explained by the fact that
the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing
The price elasticity of demand is defined as
the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good
If the price of a good is equal to the equilibrium price,
the quantity demanded is equal to the quantity supplied and the price remains unchanged.
If the price of a good is below the equilibrium price,
there is a shortage and the price will rise.
If the price of a good is above the equilibrium price,
there is a surplus and the price will fall.
"Society would be better off if the welfare system were abolished" is a normative statement, not a positive statement.
true
Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.
true
If an economy can produce more of one good without giving up any of another good, then the economy's current production point is inefficient.
true
Points inside the production possibilities frontier represent inefficient levels of production.
true
Points on the production possibilities frontier represent efficient levels of production.
true
Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity.
true
If an increase in the price of a good has no impact on the total revenue in that market, demand must be
unit price elastic.
Economics is the study of how society manages its
unlimited wants and limited resources
The opportunity cost of an item is
what you give up to get that item.