Micro exam 1 dsm
If Damarius is willing to pay $100 for his economics textbook but instead only has to pay $80, his consumer surplus is:
20$
Which of the following is consistent with the law of supply?
An increase in the market price of MP3 players causes an increase in the production of MP3 players.
According to the rationality assumption, people:
Do not intentionally make decisions that would leave them worse off.
Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer?
How do we produce the products?
Assume the cost of aluminum used by soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.
II and III
Which of the following is a positive economic statement?
If minimum wage rates rise, then unemployment will rise.
Jim declined to take part in a health study on a free basis but changed his mind after being offered $1,000 to participate in the study. Jim's behavior best illustrates which economic principle?
People respond to economic incentives.
What are copyrights designed to accomplish?
Protect intellectual property rights
The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market?
The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.
Washington state had a bumper apple crop this year, significantly increasing the supply of apples in the U.S. Given this information, choose the statement that correctly describes the effect on the U.S. apple market.
The quantity of apples demanded will increase as the price of apples falls.
Which of the following statements about a shortage is correct?
There is no shortage of most scarce goods.
Which of the following is critical to the success of the market system?
To allow individuals or firms to have exclusive use of their property
The sugar quota in the United States creates winners and losers. The winners are __________ and the losers are __________.
U.S. sugar producers, U.S. sugar consumers
Which of the following represents an inferior good?
When consumer income increases, the demand for bologna decreases.
In what type of economy does the government decide how economic resources will be allocated?
a centrally planned economy
When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?
a market
Other things remaining equal, the law of demand says that higher prices will lead to:
a smaller quantity demanded and lower prices to a larger quantity demanded.
Which of the following will cause an outward (rightward) shift in supply?
a technological improvement
Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium:
after an adjustment period that varies.
According to the theory of comparative advantage, specialization and free trade will benefit:
all trading partners who specialize in goods where they have comparative advantage
Ms. Boulware is the best lawyer and the best secretary in town. She has:
an absolute advantage in both jobs
A product produced in a foreign country and purchased by residents of the home country is called:
an import
In the United States, property rights:
are guaranteed by two amendments to the U.S. Constitution
For markets to generate the greatest benefit and function in the most efficient manner they must:
be perfectly competitive
Which of the following terms corresponds to a market where buying and selling take place at prices that violate government price regulations?
black market
Market price is determined by _________.
both supply and demand
In what type of economy does the government decide how most economic resources will be allocated?
centrally planned economy
The difference between the highest price a consumer is willing to pay for a good or service, and the price they actually pay is called:
consumer surplus
One of the first steps in deciding whether to complete your education is to:
evaluate the marginal cost and marginal benefit of that decision
In the circular flow model of the economy, __________ are the suppliers of goods and services.
firms
Tangible products like cars and televisions are referred to as __________.
goods
If a country has a comparative advantage in the production of a good, then that country:
has a lower opportunity cost in the production of that good
Contracts, insurance, patents and accounting rules are:
inventions that make a market work better
Adam Smith observed that people pursuing their own self-interest in a free market will actually result in the best interest of society as if these actions were guided by a(n):
invisible hand
Economics is...
is concerned with how people respond to incentives
Rent controls:
make tenants less mobile
Economists believe that an individual or firm should continue any activity until:
marginal benefit is equal to marginal cost
The United States economy is best classified as a
mixed economy
If an effective minimum wage is imposed, then:
more workers will be unable to find jobs
The resources provided by nature and used to produce goods and services are also known as:
natural resources
What is the name given to the highest-valued alternative that must be given up to engage in any activity?
opportunity cost
When nations specialize in their comparative advantage and engage in trade:
overall standards of living increase
The stock of computers, factory buildings and machine tools used to produce goods is known as:
physical capital
A legally determined maximum that sellers may charge is known as a:
price ceiling
In response to information regarding the salaries of executives at firms receiving bailout funds in the United States, some people called for a limit on the salaries paid to executives. Such a limit on the compensation executives can receive is an example of a:
price ceiling
Black markets may arise if:
price ceilings exist
A legally determined minimum price that sellers must receive is known as a:
price floor
Some people believe there should be a legally determined minimum price for farm products such as milk. A limit on the price of milk would be an example of:
price floor
Prolonged shortages arise if:
prices are not allowed to rise to equilibrium
Absolute advantage is the ability of an individual, firm, or country to:
produce more of a good or service than competitors using the same amount of resources
__________ is the difference between what a producer receives for a good or service and the lowest amount they would accept for that good or service.
producer surplus
In the circular flow model, which of the following refers to markets where goods such as computers or services such as medical treatment are offered?
product markets
At the market equilibrium price:
quantity demanded equals quantity supplied
A numerical limit on the quantity of a good that can be imported is a:
quota
Price performs a(n) __________ function. Inputs or outputs go to the __________ bidders if people are free to exchange voluntarily in the markets without government intervention or other market friction.
rationing; highest
In a price system:
relative prices change constantly to reflect changes in supply and demand.
Economics is the study of choice under conditions of
scarcity
The principle of opportunity cost evolves from the concept of:
scarcity
Prolonged agricultural surpluses can arise if governments:
set the price above equilibrium
Price controls that put a price ceiling on goods and services create __________.
shortages
The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the _ the payoff to devoting additional resources to that activity.
smaller
Price controls that put a price floor on goods and services create __________.
surpluses
The role of the entrepreneur always involves:
taking risks
Which of the following is not a possible opportunity cost of attending college?
the cost of housing
In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?
the division of labor
Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then:
the equilibrium price and quantity both increase.
Given linear demand curves, if demand and supply increase by identical amounts, then:
the equilibrium price stays the same and the equilibrium quantity rises.
Given linear demand curves, if demand increases and supply decreases, then __________.
the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous
All of the following scenarios depict the characteristics of complements except:
the price of coffee increases and the demand for cream increases.
