Micro Test 1

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

all of the above

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

an increase in price and an indeterminate change in quality

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

government failure

an Institution that enables buyers and sellers to interact and transact with one another is known as?

market

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

profits

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

quantity demand of X will increase

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

quantity demanded at any given price

a market is said to be in equilibrium when

quantity demanded equals quantity supplied

The latin phrase "ceteris paribus" means

Other things remain equal.

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

society may be worse off

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

$10 worth of producer surplus and unknown consumer surplus

Suppose that a customers willingness to pay for a product is $79, and sellers willingness to sell is $64. If the negotiated price is $68, how much is the consumer surplus

11

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

A decrease in the demand for bagels

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

A decrease in the size of the labor force

In a market, the equilibrium price is determined by:

Both demand and supply.

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

Choose among alternatives to satisfy their unlimited wants

The purpose of an economic model is to:

Demonstrate which values and beliefs are best for the economy

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?

Equilibrium price is indeterminate and equilibrium quantity falls.

Consumer surplus is defined as the:

Gap between the demand curve and the market price

When an economy is producing efficiently it is:

Getting the most goods and services from the available resources.

According to the law of increasing opportunity costs:

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

A corporation is a firm owned by:

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

Markets differ in:

Markets differ in all of these

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

Price to increase and quantity to decrease.

___________ occurs when goods are produced at the lowest possible cost; and ____________ occurs when individuals who desire a product the most receive those goods and dervice.

Production efficiency;Allocative efficiency

When effective price ceilings are set for a market:

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

A change in the price of a good:

Results in a change in quantity supplied.

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

That resources are fully employed in producing a particular combination of goods and services.

In economics, what does scarcity mean?

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

Which of the following is not a factor of production?

The $100,000 used to start a new business.

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

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

Opportunity cost is:

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

Ceteris Paribus, which of the following can change without shifting Demand?

The price of the good itself

A decrease in available resources would cause:

The production-possibilities curve to shift inward.

Which of the following is the best example of land?

The river water used to float a riverboat casino

The fundamental problem of economics is:

The scarcity of resources relative to human wants

The term market mechanism refers to:

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

The term opportunity costs refers to the:

Value of all the options given up when a good or service is produced.

The purpose of involving ceteris paribus is to:

simplify the analysis being done

A change in quantity supplied is the result of?

a change in the price of the good

Which of the following preforms a role in both capital and land?

a manufacturing plant and the property on which it is located.

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

a shortage

to calculate market supply we:

add the quantities supplied for each individual supply schedule horizontally

land

earns rent

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

fall because farmers will shift resources from beef production to pork production

to answer the question of how goods and services and to be produced, society much decide

how to combine its scarce resources to produce the desired products

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

increases as its price falls, ceteris paribus

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

inferior

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:

is imposing an external cost on moe

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

labor strike

The goals of market participants include the maximization of:

land, labor, capital, and entrepreneurship

which of the following illustrates the law of demand?

lindsay offers to buy more sticks of gum at $1 than at $2

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

model

Which of the following definitely means productivity has increased?

more output from fewer workers

If a price ceiling is set above the equilibrium price:

no impact is felt on the market

A single proprietorship is owned by:

one individual who is liable for the firms obligations and debt

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

one of the determinants of demand

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:

opportunity cost

According to economists, investment includes:

output which is used to produce output

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

positively affected by lower inflation rates

an effective price ceiling results in black market pressures to

raise prices because of shortages

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

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

productivity

rises when the value of output rises relative to the cost of inputs

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

shift to the right

An increase in technology:

shifts the PPF curve outward

economists make a distinction between changes in quantity supplied and changes in supply:

to distinguish a movement along the supply curve from a shift in the supply curve

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

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