Review Test 1 - Econ 2302

Which of the following is incorrect? For a price ceiling:

There will be a persistent surplus

Which of the following shifts the supply curve of popcorn to the left?

A decrease in the number of popcorn providers

Which of the following increases the supply of gasoline?

A decrease in the price of crude oil

When all other factors remain the same, the law of demand tells us that:

A decrease in the price of gas causes the quantity of gas demanded to increase.

The law of supply states that, other things staying the same, a decrease in the price of a canoe leads to:

A decrease in the quantity supplied of canoes

Who suggested that the economy is guided by an "invisible hand" as people are motivated by their self-interests?

Adam Smith

Cost-benefit analysis has the following characteristics:

All of the above are correct

There would be no need to study economics if:

All wants and needs could be satisfied at all times.

The law of demand is illustrated when:

An increase in the number of laptop computers purchased results from falling prices.

In the market for cell phones, which of the following shifts the demand curve to the right?

An increase in the price of land-line phone service

Oil companies can refine a barrel of petroleum so that it yields either more home heating oil or more gasoline. If the price of gasoline falls, there is:

An increase in the supply of home heating oil

A combination of goods represented by a point lying outside the PPC is:

Attainable only if economic growth occurs

When there is a surplus:

Both options A and C are correct

A surplus of candy means that:

Both options B and D are correct

Equilibrium prices change when:

Both options C and D are correct

Which economic system emphasizes the equal treatment of people?

Capitalist

The rulers make all the decisions (using coercion or force) in a:

Command and control economy

The goal of socialist economies is to:

Create equal outcomes through the redistribution of income/wealth

Sony and Toshiba are competitors. If the prices of Sony TVs decreases, then:

Demand for Toshiba TVs decreases

Car insurance and cars are complements. If the price of car insurance increases, the:

Demand for cars decreases

Producing a combination of goods represented by a point on the PPC is:

Efficient and attainable

Producing a combination of goods represented by a point inside the PPC is:

Efficient and attainable ---- INCORRECT ANSWER

Bowed-out PPCs obtain their shape due to constant opportunity costs.

F

If you won tickets to see the Mavericks play this Friday night, attending this event is free for you

F

In a voluntary transaction between a buyer and a seller, either the buyer or the seller benefits but not both.

F

In the labor market, supply is provided by the employer.

F

Minimum wage laws create a shortage of potential workers.

F

Price ceilings on gas created a surplus of cheap (affordable) gasoline for consumers.

F

Price ceilings were last implemented in the US during the 1990s

F

Socialist economies emphasize the equal treatment of people in order to achieve equal outcomes.

F

The top 1% of income-earners in the US make over $1,000,000 per year.

F

People who ride scooters suddenly decide that it is no longer much fun due to their fear of Steven Manley making fun of them for riding a scooter. As a result, the equilibrium price of a scooter _______ and the equilibrium quantity of scooters _______.

Falls; falls

Economics can be defined as a study of:

How individuals and society try to make the best use of scarce resources

Which of the following apply to the market for bottled water?

If a price ceiling were to be imposed by the government, if would occur at a price below $3 A price of $1 will lead to a shortage of 90 bottles At a price of $1, people will want to buy 100 bottles of water

A decrease in the price of eggs will result in:

In increase in the quantity of eggs demanded

An increase in the number of fast-food restaurants:

Increase the supply of fast-food meals

Scarcity:

Is caused by having an unlimited amount of wants and needs and a limited amount of resources available to satisfy them.

Joe chooses to watch a 2-hour movie on local TV instead of taking a 2-hour walk in the park. Opportunity cost of this decision to Joe:

Is the forgone exercise and enjoyment of the walk

______ wrote this in his influential book, "To each according to his need, from each according to his ability."

Karl Marx

Which of the following is the best example of human capital?

Knowledge of Microsoft Excel.

Congress imposes a price ceiling in the market for gasoline. It is below the equilibrium price. This will:

Lead to a shortage of gasoline

Individuals voluntarily cooperate with each other in a:

Market capitalist economy

You note that the equilibrium price and the equilibrium quantity of new houses both increase. Which of the following could cause this?

More buyers have moved into the area

Compared to a command dictator system, the market system:

More fully satisfies individual wants and needs

Rational decision-making implies that you will elect to use your resources to acquire a product that is

More valuable to you than its alternatives

In a voluntary trade:

None of the above

A black market:

Occurs as a result of government restrictions on the movements of price and quantity in a market

A market is:

Options A and B are correct (C is not)

Assume the equilibrium price for an apartment in Plano is $1000 a month. City council imposes a price ceiling of $755 a month on the Plano apartment market to help low income people. This leads to:

Options C and D are both correct

When there is a shortage:

Price is lower than the equilibrium price

In a free market, we can expect the price to:

Rise when there is a shortage and fall when there is a surplus

An increase in the tax on gasoline has increased the costs of supplying gasoline. As a result, the equilibrium price of gasoline _______ and the equilibrium quantity of gasoline _______.

Rises; falls

Bagels and cream cheese are complementary goods. The price of flour, used to make bagels, has fallen. As a result, the equilibrium price of cream cheese ______ and the equilibrium quantity of cream cheese ______.

Rises; rises

The demand curve:

Shows how much of a good will be demanded at different prices.

The equilibrium price of oranges is $2.00 a pound. If the current price is above $2.00, a __________ exists and the price of oranges will ______.

Surplus; fall

Even Bill Gates, the richest man in the world, faces the problem of scarcity.

T

Government intervention into the free market always creates some winners and some losers.

T

In a voluntary transaction between a buyer and a seller, both the buyer and the seller benefit.

T

In reality, the true minimum wage is $0/hour.

T

In the labor market, supply is provided by the employee.

T

Minimum wage laws result in a surplus of potential employees who are not working or work fewer hours.

T

Minimum wage laws result in an increase in unemployment, a reduction in the number of labor-hours, and decreased incentives to improve human capital.

T

Minimum wages laws tend to reduce the labor-hours of young, low-skilled people, the very people the law is meant to help

T

Policy-makers who advocate for minimum wage laws do so because they believe workers should be paid based on their level of need as opposed to their productivity.

T

The top 1% of income-earners in the US make over $420,000 per year (approximately).

T

Which of the following is not a determinant of demand?

Technological improvements in production

Purchasing power is defined as:

The ability to let you buy things you want to buy

In a modern free market, the price of a good or service is determined by:

The interaction of the behaviors of buyers and sellers