Micro Exam 1

The term market describes an institution that brings together buyers and sellers of goods or services. A. True B. False

A. True

The term normal good describes a good for which the quantity demanded rises when income rises. A. True B. False

A. True

Zero elasticity means the highly inelastic case in which a percentage change in price, no matter how large, results in zero change in the quantity demanded or supplied. A. True B. False

A. True

Model is a simplified representation of an object or situation that includes enough of the key features to be useful. A. True B. False

A.True

The term inferior good refers to the percentage change in the quantity of savings divided by the percentage change in interest rates. A. True B. False

B. False

Exports are goods and services that are produced domestically and sold in another country.A. TrueB. False Select one: True False

True

Demand and supply refer to various goods that people are willing to buy and/or sell at various prices at ____________. Select one: a. a given time b. varying locations c. varying times

a. a given time

If demand is elastic, then Select one: a. a price rise decreases revenue. b. a price rise increases revenue. c. the effect of a price rise on revenue needs other information. d. a price rise has no effect on revenue, since the rise in price is offset by the fall in quantity.

a. a price rise decreases revenue.

Demand is said to be ____________ when the quantity demanded is very responsive to changes in price. Select one: a. elastic b. unit elastic c. inelastic d. independent

a. elastic

Figure 5-1Refer to Figure 5-1. Graph B represents a demand curve that is relatively ____________. Total revenue ____________ as the price decreases from $10 to $5. Select one: a. inelastic; decreases b. elastic; decreases c. elastic; increases d. inelastic; increases

a. inelastic; decreases

Figure 2-2Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy: Select one: a. is not using its resources efficiently. b. is using its resources efficiently while producing clothing but no food. c. is using its resources efficiently while producing food but no clothing. d. is using its resources efficiently to produce both food and clothing.

a. is not using its resources efficiently.

If the government sets prices for wheat or corn that guarantee farmers a specific price for that product, the most probable result would be what? Select one: a. over production. b. more buyers would leave the market. c. the market would suffer shortages.

a. over production.

Demand "A" represents a demand curve that is what? Select one: a. perfectly elastic b. relatively inelastic c. relatively elastic

a. perfectly elastic

Demand "D" represents a demand curve that is what? Select one: a. perfectly inelastic b. relatively inelastic c. perfectly elastic

a. perfectly inelastic

A demand curve shows the relationship between price and ____________ on a graph. Select one: a. quantity demanded b. quantity produced c. economies of scale d. costs

a. quantity demanded

The opportunity cost of attending university is likely to include all except which of the following? Select one: a. the cost of haircuts received during the school term b. the income you forgo in order to attend classes c. tuition fees d. the cost of required textbooks

a. the cost of haircuts received during the school term

As depicted in ____________, it is necessary to give up some of one good to gain more of the other good. Select one: a. the production possibilities frontier b. allocative efficiency c. scarcity d. utility

a. the production possibilities frontier

Macroeconomic topics do not usually include: Select one: a. the profit maximizing decisions of an individual manufacturer. b. the rate of inflation. c. the rate of unemployment. d. economic growth.

a. the profit maximizing decisions of an individual manufacturer.

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of: Select one: a. the supply curve. b. the demand curve, as consumers try to economize because of the shortage. c. both the supply and demand curves. d. the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.

a. the supply curve.

If cola and iced tea are good substitutes for consumers, then it is likely that: Select one: a. their cross price elasticities are greater than zero. b. their price elasticities of demand are less than one. c. their income elasticities are less than zero. d. their price elasticities of supply are less than one.

a. their cross price elasticities are greater than zero.

According to the law of supply: Select one: a. there is a direct relationship between price and the quantity supplied. b. there is an inverse relationship between price and the quantity supplied. c. there is a direct relationship between price and quantity demanded. d. there is an inverse relationship between price and quantity demanded.

a. there is a direct relationship between price and the quantity supplied.

A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result: Select one: a. total revenue will decrease. b. total revenue will increase. c. total revenue will remain constant. d. the elasticity of demand will increase.

a. total revenue will decrease.

What term is used to describe the branch of economics that focuses on the economy as a whole, including issues like growth, unemployment, inflation, and the balance of trade? Select one: a. Command economy b. Macroeconomics c. Labor markets d. Financial capital markets

b. Macroeconomics

When considering a peanut butter and jelly sandwich, economics would refer to jelly as which of the following? Select one: a. a substitute b. a complement c. taste

b. a complement

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is: Select one: a. no change; only the supply curve for beef is likely to be affected. b. a shift of the demand curve for beef to the left. c. a movement down along the demand curve for beef to the right. d. a shift of the demand curve for beef to the right.

b. a shift of the demand curve for beef to the left.

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: Select one: a. all consumers. b. buyers and sellers. c. producers and input suppliers. d. producers and government planning committees.

b. buyers and sellers.

Specialization: Select one: a. leads to greater self-sufficiency. b. can lead to an increase in overall production. c. allows workers to develop skills by working on a large number of tasks d. is always the result of an inefficient use of resources

b. can lead to an increase in overall production.

If the demand curve is perfectly elastic, then an increase in supply will: Select one: a. decrease the price but result in no change in the quantity exchanged. b. increase the quantity exchanged but result in no change in the price. c. increase the price but result in no change in the quantity exchanged. d. increase both the price and the quantity exchanged.

b. increase the quantity exchanged but result in no change in the price.

Demand is said to be ____________ when the quantity demanded is not very responsive to changes in price. Select one: a. independent b. inelastic c. unit elastic d. elastic

b. inelastic

Scarcity implies that: Select one: a. consumers would be willing to purchase the same quantity of a good at a higher price. b. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. c. at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce. d. consumers are too poor to afford the goods and services available.

b. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to: Select one: a. rise and the equilibrium quantity to fall. b. rise and the equilibrium quantity to stay the same. c. rise and the equilibrium quantity to rise. d. stay the same and the equilibrium quantity to fall.

b. rise and the equilibrium quantity to stay the same.

No society can produce everything it wants due to which of the following reasons? Select one: a. inefficient production b. scarcity c. cost

b. scarcity

If new manufacturers enter the computer industry, then (ceteris paribus): Select one: a. the supply curve shifts to the left. b. the supply curve shifts to the right. c. the demand curve shifts to the left. d. some established manufacturers must exit the industry.

b. the supply curve shifts to the right.

Demand is said to be ____________ when the quantity demanded changes at the same proportion as the price. Select one: a. elastic b. unit elastic c. inelastic d. independent

b. unit elastic

Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi?7 fs demand curve? Select one: a. 0.1 b. 0.8 c. 1.0 d. 10.0

c. 1.0

Figure 2-1Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: Select one: a. A to B b. B to E c. C to F d. G to F

c. C to F

See Chart A above. Line De represents the current household demand for a specific product. If income taxes are reduced, which line will represent the demand for that specific product? Select one: a. D1 b. De c. D2

c. D2

What name is given to dividing the work required to produce a good or service into tasks performed by different workers? Select one: a. Division of financial capital b. Globalization c. Division of labor d. Microeconomics

c. Division of labor

What is meant by normative statements? Select one: a. Whatever must be given up to obtain something that is desired. b. Statements that describe the world as it is. c. Statements that describe how the world should be. d. Statements that describe costs that were incurred in the past and cannot be recovered, and thus should not affect current decisions.

c. Statements that describe how the world should be.

What is meant by cross-price elasticity of demand? Select one: a. The percentage change in quantity supplied divided by the percentage change in price. b. The highly inelastic case in which a percentage change in price, no matter how large, results in zero change in the quantity demanded or supplied. c. The percentage change in the quantity of good A that is demanded as a result of a percentage change in the price of good B. d. How much a percentage change in quantity demanded or quantity supplied is affected by a percentage change in price.

c. The percentage change in the quantity of good A that is demanded as a result of a percentage change in the price of good B.

See Chart B above. Line Se represents the current supply of Ford F150 pickup trucks. If Ford negotiates a new contract with the United Auto Workers, resulting in a significant reduction in Ford's cost of labor, would the supply curve change? Select one: a. Yes, line S1 would be the new supply curve b. No, line Se would remain the supply curve c. Yes, line S2 would be the new supply curve

c. Yes, line S2 would be the new supply curve

When ____________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right. Select one: a. prices rise b. equilibrium is achieved c. costs of production fall d. there is a population increase

c. costs of production fall

Figure 3-2Refer to Figure 3-2. A change from Point A to Point B represents a: Select one: a. increase in demand. b. decrease in demand. c. decrease in quantity demanded. d. increase in quantity demanded.

c. decrease in quantity demanded.

When it is possible for a producer to cover his production cost and make a profit he has a ____________ to enter the market place. Select one: a. ability b. factor c. incentive

c. incentive

Figure 3-3Refer to Figure 3-3. A change from Point A to Point B represents a: Select one: a. increase in supply. b. decrease in supply. c. increase in quantity supplied. d. decrease in quantity supplied.

c. increase in quantity supplied.

Taxes on goods with ____________ demand curves will tend to raise more tax revenue for the government than taxes on goods with ____________ demand curves. Select one: a. elastic; unit elastic b. elastic; inelastic c. inelastic; elastic d. unit elastic; inelastic

c. inelastic; elastic

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the ____________. Select one: a. income gap b. market equilibrium c. law of demand d. price model

c. law of demand

The basic difference between macroeconomics and microeconomics is: Select one: a. microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. b. microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms. c. microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. d. microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

c. microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

The downward slope of the demand curve again illustrates the pattern that as ____________ rises, ____________ decreases. Select one: a. quantity demanded, price b. quantity supplied, quantity demanded c. price, quantity demanded d. price, quantity supplied

c. price, quantity demanded

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the ____________. Select one: a. demand curve to the right b. supply curve to the left c. supply curve to the right d. demand curve to the left

c. supply curve to the right

Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is: Select one: a. Point B b. Point C c. Point D d. All points on the production possibilities frontier are equally efficient.

d. All points on the production possibilities frontier are equally efficient.

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect: Select one: a. Andy's demand for pizza to increase. b. Andy's demand for pizza to decrease. c. Andy's quantity of pizza demanded to decrease. d. Andy's demand for beer to increase.

d. Andy's demand for beer to increase.

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that: Select one: a. the price of Good Y will increase. b. Goods X and Y are normal goods. c. Goods X and Y are substitute goods. d. Goods X and Y are complement goods.

d. Goods X and Y are complement goods.

What name is given to the extremely elastic situation where quantity changes by an infinite amount in response to even a tiny change in price? Select one: a. Elasticity of demand b. Elasticity of supply c. Inelastic d. Infinite elasticity

d. Infinite elasticity

Figure 2-1Refer to Figure 2-1. The most inefficient point depicted is: Select one: a. Point A b. Point C c. Point D d. Point G

d. Point G

A price cut will increase the total revenue a firm receives if the demand for its product is: Select one: a. unit inelastic. b. unit elastic. c. inelastic. d. elastic.

d. elastic.

Figure 3-3Refer to Figure 3-3. A change from Point A to Point D represents a: Select one: a. decrease in quantity supplied. b. increase in quantity supplied. c. decrease in supply. d. increase in supply.

d. increase in supply.

The opportunity cost of an action: Select one: a. can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action. b. can be determined by adding up the bills incurred as a result of the action. c. can be objectively determined only by economists. d. is a subjective valuation that can be determined only by the individual who chooses the action.

d. is a subjective valuation that can be determined only by the individual who chooses the action.

Price elasticity of demand is defined as: Select one: a. the slope of the demand curve. b. the slope of the demand curve divided by the price. c. the percentage change in price divided by the percentage change in quantity demanded. d. the percentage change in quantity demanded divided by the percentage change in price.

d. the percentage change in quantity demanded divided by the percentage change in price.

Scarcity exists because of: Select one: a. the market mechanism. b. specialization and division of labor. c. the allocation of goods by prices d. unlimited wants and limited resources.

d. unlimited wants and limited resources.