Micro Exam 1

Which of the following performs the role of both capital and land?

A) A manufacturing plant and the property on which it is located.

A leftward shift of the market supply curve, ceteris paribus, causes equilibrium:

A) Price to increase and quantity to decrease.

If you were willing to sell an old bicycle for $30, but someone offers you $40 for it, the result of the transaction would yield:

A. $10 worth of producer surplus and unknown consumer surplus

The table above shows the demand of three individuals in a market. Assuming these are the only buyers, what is total market demand if price is $20?

A. 5 units

Suppose there are a series of forest fires which affect the lumber industry while, at the same time, consumers demanded more wooden furniture. The wooden furniture would experience:

A. An increase in price and an interminate change in quantity

When government directives do not produce a better economic outcomes, which of the following has occurred?

A. Government failure

An item whose demand rises as people's incomes fall is known as a(n) ________ good.

A. Inferior

Economics is a social science that involves the study of how individuals, firms, and societies:

A. Mazimize happiness

Which of the following definitely means productivity has increased?

A. More output from fewer workers

According to economists, investment includes

A. Output which is used to produce output

__ Occurs when goods are produced at the lowest possible cost, and ____ occurs when individuals who desire a product the most recieve those goods and service

A. Production efficiency; allocative effiecieny

Productivity:

A. Rises when the value of output rises relative to the cost of inputs

The term market mechanism refers to:

A. The use of market prices and sales to determine resource allocation

The goals of market participants include the maximization of:

A. Utility, profits, and the general welfare of society

Other things remaining the same, an increase in the price of Chevrolets will cause the demand for Ford to:

A. shift to the right

An increase in technology:

A. shifts the PPF curve outward

The purpose of invoking ceteris paribus is to:

A. simplify the analysis being done

In the graph above a shift to the right of the demand curve would be caused by anything, EXCEPT:

A.Decrease in the population

To calculate market supply, we

Add the quantities supplied for each individual supply schedule horizontally.

Which of the following graphs shows an increase in quantity supplied?

B

If the government prevented prices from falling to their equilibrium levels, there would be:

B) A surplus.

In this graph above, total surplus is shown by area:

B) ace.

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $68, how much is consumer surplus?

B-$11

Which of the following is the best example of land?

B. A factory that produces new goods and services

If the government prevented prices from falling to their equilibrium levels, there would be:

B. A surplus

Suppose that the price of pork rises. We would expect that the supply of beef will:

B. Fall because farmers will shift resources from beef production to pork production

When an economy is producing efficiently it is:

B. Getting the most goods and services from the available resources.

Which of the following events would cause the production possibilities frontier to shift inward?

B. Increased efficiency in using resources

Joe fixes cars for a living in his driveway. He works late at night and makes so much noise that Moe, his neighbor across the street, cannot sleep. Joe:

B. Is imposing an external cost on Moe

Which of the following illustrates the law of demand?

B. Lindsey offers to buy more sticks of chewin gum at $1 than at $2

A corporation is a firm owned by:

B. Many people who own shares (stock) in a firm, but who are not liable for the firm's debt.

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a:

B. Model

If a price ceiling is set above the equilibrium price:

B. No impact is felt in the market

If you accept a job in Seattle as a financial analyst, you must give up the chance to accept a similar job in Australia. Giving up the job in Australia is your:

B. Opportunity cost

When effective price ceilings are set for a market:

B. Quantity demanded will be less than the equilibrium quantity, and price will be greater than the equilibrium price

A decrease in available resources would cause:

B. The production-possibilities frontier to shift inward.

Given a downward-sloping market demand curve for product X, if the price of X is reduced from $10 to $8, then, ceteris paribus:

B. The quantity demanded for X will increase

The fundamental problem of economics is

B. The scarcity of resources relative to human wants

Economists make a distinction between changes in quantity demanded and changes in demand:

B. To distinguish a movement along a supply curve from a shift in the supply curve

Land:

B. earns rent

Which of the following graphs concerning hamburgers indicates an increase in the quantity demanded of hamburgers?

C

The above table shows coffee and tea units produced for the United States and Japan. If Japan decides to increase production of tea from 20 units to 35 units, the opportunity cost is:

C) 8 units of coffee

Which of the following will cause the production-possibilities curve to shift inward?

C) A decrease in the size of the labor force.

In a market, the equilibrium price is determined by:

C) Both demand and supply.

Suppose in the market for iPhones, the following two changes take place: (1) the cost of making iPhones rises and (2) customers begin to prefer Android-platform smart phones over iPhones. What happens to equilibrium price and equilibrium quantity?

C) Equilibrium price is indeterminate and equilibrium quantity falls.

According to the law of increasing opportunity costs

C. Greater production of one good requires increasingly larger sacrifices of other goods

To answer the question of how the goods and services are to be produced, society must decide:

C. How to combbine its scarce resources to produce the desired products

In the graph above, which of the following would change demand from D0 to D1?

C. Increase in the price of a substitute good

According to the law of demand, the quantity of a good demanded in a given time period:

C. Increases as its price falls, ceteris paribus

The Latin phrase ceteris paribus means:

C. Other things remain equal

In a market economy, which of the following is an incentive for producers to produce efficiently?

C. Profits

A shift in the demand is defined as a change in the:

C. Quantity demanded at any given price

An effective price ceiling results in black-market pressures to:

C. Raise prices because of shortages

A change in the price of a good:

C. Results in a change in quantity supplied.

The result of government intervention in the market, is that:

C. Society may be wrose off

When economists talk about "optimal outcome" in the marketplace, they mean that:

C. The allocation of resources by the market is likely to be the best possible, givenscarce resources and income constraints.

Consumer surplus is defined as the:

C. The difference between the price floor and market price

When the market mechanism is allowed to operate freely, prices will determine

C. To whom the output will be distributed

A single proprietorship is a firm owned by:

C. one individual who is liable for the firm's obligations and debt

In economics, what does scarcity mean?

C. that society's desires exceed the want-satisfying capability of the resources available to satisfy those desires.

A change in quantity supplied is the result of:

D

In the above graph, what is the formula for producer surplus?

D

The market mechanism:

D) Allocates goods in an equitable manner.

A point on a nation's production-possibilities frontier indicates:

D) That resources are fully employed in producing a particular combination of goodsand services.

Scott decided to sleep in rather than attend his 8:30 A.M. economics class. Economists would find this choice:

D) rational, if Scott values sleep more highly than the benefit he would expect to receive from attending the class.

An institution that enables buyers and sellers to interact and transact with one another is known as an

D- Market

If bagels and donuts are substitutes, then a decrease in the price of donuts will result in:

D. A decrease in the demand for bagels

Markets differ in:

D. Markets differ in all of these

A shift in the demand curve is caused by a change in:

D. One of the determinants of demand

A study by the Organization for Economic Co-operation and Development (OECD) on factors driving economic growth finds per capita GDP is:

D. Positively affected by lower inflation rates

Opportunity cost is:

D. The alternative that must be given up in order to get something else

Ceteris paribus, which of the following can change without shifting demand?

D. The price of the good itself

A market is said to be in equilibrium when:

D. The quantity demanded equals the quantity supplied

The term opportunity costs refers to that:

D. Value of the best option given up when a good or serivice is produced

Reasons to study economics include all of the following, EXCEPT that you:

D. will learn exactly how to invest your cash short-term for the highest return on investment

The purpose of an economic model is to:

Demonstrate which values and beliefs are best for the economy

According to the law of supply, if the price of calculators decreased, the supply of calculators would decrease, ceteris paribus.

False

All of the choices on the production possibilities frontier are equally desirable.

False

Both supply and demand curves depend on expectations but the supply curve depends on the expectations of the buyer and the demand curve depends on the expectations of the seller

False

If the market price of Beanie Babies increases, then the supply curve of Beanie Babies will shift to the right

False

In a market economy, prices are determined by the consumer, in a planned or command economy, prices are determined by the seller

False

In the graph above, if the government sets a price of $5, this is an example of an effective price floor

False

It is impossible to have a conflict between allocative efficiency and productive efficiency

False

Land, labor, capital and entrepreneurship are bought and sold in the product market.

False

Mathematically, the law of demand refers to the positive relationship between price and quantity demanded

False

Normative and positive questions are basically involving the understanding of basic facts.

False

Output combinations that lie inside the production-possibilities frontier are characterized by efficient use of resources.

False

Technological advance shifts the production-possibilites frontier inward

False

The choice to attend a free college lecture involves absolutely no opportunity cost

False

When a seller sells a good, the supply curve shifts to the right.

False

Which of the following is not a factor of production?

The $100,000 used to start a new business

A decrease in the level of resource utilization would bring about an inward shift of a PPF.

True

All output combinations that lie outside a production-possibilities frontier are unattainable with available resources and technology.

True

An increase in the price of one good can cause the demand for another good to decrease if the goods are complements.

True

Another term for market economy is capitalistic economy

True

Education and training are an example of investment in human capital

True

Goods are scarce because society's desire for them exceeds society's ability to produce them.

True

Government regulations, taxes, and subsidies affect the mix of output in the economy

True

If a price ceiling is set above the market price, it is ineffective

True

Market price is always the same thing as equilibrium price

True

Price signals direct the answers to the WHAT, HOW, and FOR WHOM questions in a laissez-faire economy.

True

The demand schedule and demand curve remain unchanged only so long as the underlying determinants of demand remain constant

True

The market price equals the equilibrium price if quantity demanded equals quantity supplied, at the market price.

True

There are never shortages or surpluses when the price in a market is equal to the equilibrium price for the market.

True

Thinking at the margin is defined as maximizing a firm's or individual's well-being

True

When imports are larger than exports, the value of net exports is negative.

True

When individual supply curves shift, ceteris paribus, the market supply curve shifts

True

When the number of buyers in a market changes, the market demand curve for goods and services also changes, even if individual demand curves do not shift

True

A decrease in the proportion of the population that is unemployed is best represented in Figure 1.4 (above) by a movement from point:

b. B to point C.

When a factory pollutes the air we breathe in a market economy, this situation is known in economics as market failure

false

In Figure 3.5 above, at a price of $100:

quantity supplied is greater than quantity demanded

In the graph below, if the government sets a price of $25, there is a shortage of 600.

true

One reason that buyers purchase less of a product when its price rises is that they switch to substitute items

true

Price signals direct the answers to the WHAT, HOW, and FOR WHOM questions in a laissez-faire economy.

true

when a scare good or resource is consumed by a person who does not value it most, economists refer to the situation as a misallocation of resources

true