Study Questions #1 Multiple Choice
when the market mechanisim is allowed to operate freely prices will determine:
all the above
the market mechanism:
allows buyers to communicate with producers indiretly
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 quantity
An institution that enables buyers and sellers to interact with one another is known as a:
market
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
when government directives do not produce economic outcomes, which of the following has occurred?
government failure
according to the law of in creasing opportunity costs:
greater production of one good requires increasingly larger sacrifices of other goods
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
in a market economy, which of the following is an incentive for producers to produce efficiently?
profits
a shift in demand is defined as a change in the:
quantity demanded at any given price
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 customer's willingness to sell if $79, and the seller's willingness to sell is $64 If the negotiated price is $68, how much is the customer surplus?
$11
the formula for producer surplus
0.5 x (i-j) x (k-i)
which of the following illustrates the law of demand?
Lindsay offers to buy more sticks of gum at $1 than at $2
______ occurs when goods are produced at the lowest possible cost and _______ occurs when individuals who desire a product the most receive those goods and service
Production efficiency ; allocative efficiency
to calculate market supply we:
add the quantities supplied for each individual supply schedule horizontally
a change in quantity supplied is the result of :
a change in the price of the good
if bagels and donuts are substitutes, then a decrease in the price of donuts will result in:
a decrease in the demand for bagles
which of the following will cause the production-possibilities curve to shift inward?
a decrease in the size of the labor force
which of the following performs the role of both capital and land?
a manufacturing plant and the property on which it is located
which of the following is not a factor of production?
a psychiatrist
If the government prevented prices from falling to their equilibrium levels, there would be:
a surplus
if the government prevented prices from falling to their equilibrium levels, there would be :
a surplus
the purpose of an economic model is to:
be complex, exact replica of reality
in a market, the equilibrium price is determined by:
both demand and supply
economics is a social science the involves the study of how individuals, firms, and societies :
choose among alternatives to satisfy their unlimited wants
Given a downward-slopping market demand curve for product X, if the price of X is reduced from $10 to $8, then, ceteris paribus:
demand for X will increase
Land:
earns rent
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 and quantity fall
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
the purpose of invoking ceteris paribus it to:
simplify the analysis being done
To answer the question of how goods and services are to be produced, society must decide:
how to combine its scarce resources to produce the desired products
which of the following events would cause the production-possibilities frontier to shift outward?
increased efficiency in using resources
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 an _______ good.
inferior
joe fixes cars for a living in his driveway. he works late night and make so much noise that moe, his neighbor, cannot sleep. Joe:
is imposing external costs on moe
a corporation is a firm owned by"
many people who own shares on 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:
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 in the market
a single proprietorship is a firm owned by:
one individual who is liable for the firm's 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
the Latin phrase ceteris paribus means:
other things remain equal
according to economists, investment includes:
output which is used to produce output
a study by the organization for economic co-operation and development on factors driving economic growth finds per capita GDP is:
positively affected by lower inflation rates
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
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 am economics class. Economists would find this choice:
rational , if scott values sleep more highly than the benefit he would expect to receive from attending class
a change in the price of a good:
results in a change in quantity supplied
Productivity:
rises when the ratio of output to input increases
other things remaining the same, an increase in the price of Chevrolet will cause the demand for Ford to:
shift to the right
in increase in technology :
shifts the PPF curve outward
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
when economists talk about "optimal outcomes" in the market place, they mean that:
the allocation of resrouces 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
a decrease in available resources would cause:
the production -possibility frontier to shift inward
a market is said to be in equilibrium when"
the quantity demanded equals the quantity supplied
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
economists make a distinction between changes in quantity supplied and changes in supply:
to distinguish a movement along a supply curve from a shift in the suppl curve
the goals of market participants include the maximization of:
utility, profits, and the general welfare of society
the term opportunity costs refers to the:
value of the best option given up when a good or service is produced
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