1st test myecon lab

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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 supply of soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The demand for soft drinks decreases. IV. The quantity of soft drinks supplied decreases.

2/1

After Russia seized what had formerly been the Ukrainian territory of Crimea in February 2014, the United States and many other countries imposed economic sanctions that reduced the ability of Russia to engage in international trade. A columnist writing in the New York Times noted that, "If sanctions push Russia onto a path of greater self-reliance, its manufacturing and service industries will surely grow faster...." Source: Anatole Kaletsky, "Reasons to Welcome a Ukraine Deal," New York Times, September 18, 2014. If the columnist is correct about the effect of the sanctions, then, in the long run, the sanctions will A. decrease the economic well-being of the average Russian because Russia will have to produce some goods and services at a higher cost than its trading partners. B. increase the economic well-being of the average Russian because its manufacturing and service industries will surely grow faster. C. increase the economic well-being of the average Russian because there will more employment to meet the needs of the growing manufacturing sector. D. decrease the economic well-being of the average Russian because there will be lost markets.

In a competitive market, firms can dictate what the equilibrium price of a good or a service will be. A. False B. True

In general, the term "ceteris paribus" means A. all else equal. B. holding everything else variable. C. unsettled mathematical paradigms. D. Both A and B

Some economists have been puzzled that although entrepreneurs take on the risk of losing time and money by starting new businesses, on average their incomes are lower than those of people with similar characteristics who go to work at large firms. William Baumol believes part of the explanation for this puzzle may be that entrepreneurs are like people who buy lottery tickets. On average, people who don't buy lottery tickets are left with more money than people who buy tickets because lotteries take in more money than they give out. Baumol argues that "the masses of purchasers who grab up the [lottery] tickets are not irrational if they receive an adequate payment in another currency: psychic rewards." Source: William J. Baumol, The Microtheory of Innovative Entrepreneurship, Princeton, NJ: Princeton University Press, 2011. The term "psychic rewards" refers to A. nonmonetary forms of remuneration that are psychologically uplifting. B. financial payments that boost one's psyche. C. gains attained by "out psyching" one's foes. D. rewards that accrue from the use of psychic powers.

The difference between a change in supply and a change in the quantity supplied is that the latter is A. produced by a change in the product's own price while the former is caused by a variety of variables other than the product's price. B. conditional upon a change in the former, but not vice versa. C. determined by the willingness of producers to sell while the former is set by the ability of firms to produce. D. shown as a shift in the supply curve while the former is displayed graphically as a movement along a supply curve.

The three economic questions that every society must answer are A. What goods will be produced, how will they be produced, and who will receive the goods? B. What economic system will be used, how will it be implemented, and who will make market decisions? C. What kind of government will the society have, how will it be run, and who will run it? D. What are the prices of goods, how are they determined, and who will pay for them?

Using the same amount of resources, suppose that Nicaragua can produce twice as much sugar as Columbia. Nevertheless, Columbia could still have the comparative advantage in producing sugar if A. it is even less efficient than Nicaragua in the production of goods other than sugar. B. it negotiates trade agreements that assign it the comparative advantage in sugar. C. its currency is more than double the value of Nicaragua's currency. D. it possesses more than double the sugar-making resources as Nicaragua.

What happens if a country produces a combination of goods that efficiently uses all of the resources available in the economy? A. The country is operating on its production possibilities frontier. B. The country is maximizing its opportunity cost. C. The country has eliminated scarcity. D. All of the above occur if a country uses all available resources.

What is the law of demand? The law of demand is the A. rule that, holding everything else constant, when the price of a good falls, the quantity demanded will increase, and when the price of a good rises, the quantity demanded will decrease. B. rule that, holding everything else constant, when the price of a good rises, the quantity demanded will increase, and when the price of a good falls, the quantity demanded will increase. C. requirement that when analyzing the relationship between price and quantity demanded, other variables must be held constant. D. rule that, holding everything else constant, when the price of a good rises, the quantity demanded will increase, and when the price of a good falls, the quantity demanded will decrease.

What is the circular-flow diagram and what does it illustrate? A. The circular-flow diagram shows how households and firms are linked through product and factor markets. B. The circular-flow diagram shows how households are linked through product and factor markets. C. The circular-flow diagram shows the government's role in markets through taxes and transfer payments. D. The circular-flow diagram shows the maximum attainable combinations of two products that may be produced with available resources and current technology. E. The circular-flow diagram shows how households and firms are linked through factor markets.

When the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives, A. the policies are consistent with economic incentives. B. pollution is likely to increase. C. the policies are likely to be more successful than policies that cost firms more, but they do not recognize economic incentives. D. the policies are futile because where the environment is concerned, it has been repeatedly shown that firms do not respond to economic incentives.

Which of the following events would shift the supply of smartphones to the right? A. a decrease in the price of inputs used to produce smartphones B. an increase in the expected future price of smartphones C. a decrease in the price of smartphones D. All of the above.

Which of the following illustrates the law of supply? A. An increase in price causes an increase in the quantity supplied, and a decrease in price causes a decrease in the quantity supplied. B. An increase in the number of firms in an industry causes a shift of the supply curve. C. A change in price causes a shift of the supply curve. D. All of the above illustrate the law of supply.

With respect to consumption, individuals and countries A. can, through trade, consume beyond their production possibilities frontiers. B. can, by choosing not to save for the future, consume beyond their production possibilities frontiers. C. can consume beyond their production possibilities frontiers only during periods of economic prosperity. D. are contrained to consume on or inside their production possibilities frontiers.

Writing in the New York Times, Michael Lewis argued that "...a market economy is premised on a system of incentives designed to encourage an ignoble human trait: self-interest." Source: Michael Lewis, "In Defense of the Boom." New York Times, October 27, 2002. What incentives does a market system provide to encourage self-interest? A. Financial reward. B. Selfishness. C. Equity. D. Government sanctions. E. Both a and b.

[Related to Making the Connection] In a famous essay on the market system, the economist Leonard Read discussed how a pencil sold by the U.S. firm Eberhard Faber Pencil Company (now owned by Paper Mate) was made. He noted that logging companies in California and Oregon grew the cedar wood used in the pencil. The wood was milled into pencil-width slats at a factory in San Leandro, California. The graphite for the pencil was mined in Sri Lanka and mixed with clay purchased from a firm in Mississippi and wax from a firm in Mexico. The rubber was purchased from a firm in Indonesia. Source: Leonard E. Read, I, Pencil: My Family Tree as told to Leonard E. Read, Irvington-on-Hudson, NY: The Foundation for Economic Education, Inc. December 1958. Which of the following statements is true? A. It was not necessary for the managers of any of firms that participated in the making of the pencils to know how the components they produced were used to make pencils. B. According to Adam Smith's "circular flow" metaphor, only the managers need to know this information. C. As long as the CEO of the Eberhard Faber Company had this knowledge about the components, that is sufficient. D. Each of the managers of all of the firms that participated in the making of the pencils had to know how the components they produced were used to make pencils.

[Related to the Making the Connection] A news story on declining attendance at college football games noted that schools in the central time zone had particular problems with attendance at games that started at 11 a.m. The athletic director at the University of Illinois was quoted as saying, "I'm a big fan of evening games." Source: Adam Rittenberg, "Attendance Challenges Big Deal for B1G," espn.com, February 17, 2014. Playing games in the late afternoon or evening, rather than in the morning, would A. change the opportunity cost for students whose alternative activities vary throughout the day. B. take the same amount of time, so the opportunity cost would not change. C. not change attendance because the real fans would attend no matter what the time. D. only change the opportunity cost if the ticket prices changed.

Which of the following statements about microeconomics and macroeconomics is correct? A. Microeconomics involves the study of how households and firms make choices. B. All economic situations can be categorized as being microeconomics or macroeconomics. C. Macroeconomics does not involve the analysis of economic policy. D. Microeconomics does not involve the analysis of economic policy. Which of the following statements about microeconomics and macroeconomics is correct? A. Macroeconomics is the study of the economy as a whole. B. Microeconomics does not involve the analysis of economic policy. C. Macroeconomics does not involve the analysis of economic policy. D. All economic situations can be categorized as being microeconomics or macroeconomics.

A A

A news story from 2015 about the oil market stated, "the global glut of crude that has hit [oil] prices is starting to shrink." Source: Christopher Harder, "Investors Take Closer Look at Output," Wall Street Journal, May 18, 2015. a. In referring to a "global glut of crude," the article describes the result of a significant A. increase in supply of, relative to the demand for, crude oil. B. decrease in supply of, relative to the demand for, crude oil. C. increase in demand for, relative to the supply of, crude oil. D. increase in demand for, and the supply of, crude oil. This change resulted in a A. a surplus of oil such that there is a greater quantity supplied than quantity demanded for crude oil. B. a surplus of oil such that there is a greater quantity demanded than quantity supplied of crude oil. C. a shortage of oil such that there is a greater quantity supplied than quantity demanded for crude oil. D. a shortage of oil such that there is a greater quantity demanded than quantity supplied of crude oil. In response to the global glut of oil, the market price will A. rise to a new, higher equilibrium price at which the quantity demanded would equal the quantity supplied. B. fall to a new, lower equilibrium price at which the quantity demanded would be lower than the quantity supplied. C. rise to a new, higher equilibrium price at which the quantity demanded would be greater than the quantity supplied. D. fall to a new, lower equilibrium price at which the quantity demanded would equal the quantity supplied. The glut will start to shrink when crude oil producers A. increase the amount that they offer for sale, and buyers decrease the amount they buy. B. reduce the amount that they offer for sale, and buyers decrease the amount they buy. C. reduce the amount that they offer for sale, and buyers increase the amount they buy. D. increase the amount that they offer for sale, and buyers increase the amount they buy.

A A D C

According to one news story, the cost of producing 4K televisions has been declining. According to a second story, many people have switched from watching programs on television sets to watching them on smartphones, tablets, or laptops. After reading these news stories article, a student argues: "From this information, we know that the price of 4K televisions will fall, but we don't know whether the quantity of television sets sold will increase or decrease." Source: Geoffrey A. Fowler, "Vizio Fixes Flaw in Cheap 4K TV?as Competition Heats Up," Wall Street Journal, January 13, 2015; and Suzanne Vranica and Shalini Ramachandran, "Streaming Services Hammer Cable TV Ratings," Wall Street Journal, March 10, 2015. This student's analysis (that we know that the price of 4K televisions will fall, but we don't know whether the quantity of television sets sold will increase or decrease) is A. correct. When there is an increase in supply and a decrease in demand, the new equilibrium price is known but the equilibrium quantity is unknown. B. incorrect. When there is an increase in supply and a decrease in demand, the new equilibrium price and quantity are both unknown. C. incorrect. When there is an increase in supply and a decrease in demand, the new equilibrium price and quantity are both known. D. incorrect. When there is an increase in supply and a decrease in demand, the new equilibrium quantity is known but the equilibrium price is unknown. The new equilibrium quantity will be A. point D. B. between points B and D. C. point C. D. between points E and F.

A B

Which of the following areas of economics studies issues such as ways to reduce teenage smoking? A. Microeconomics B. Macroeconomics C. Both microeconomics and macroeconomics give equal emphasis to these problems. D. This cannot be determined by the information given. Which of the following areas of economics studies issues such as whether government intervention is capable of reducing the severity of recessions? A. Microeconomics B. Macroeconomics C. Both microeconomics and macroeconomics give equal emphasis to these problems. D. This cannot be determined by the information given.

A B

A production possibilities frontier: A. shows the maximum attainable combinations of two goods that may be produced with available resources. B. shows the market for a good or service. C. shows how participants in the market are linked. D. shows how unlimited wants exceed the limited resources available to fulfill those wants. E. shows the act of buying and selling. We can show economic efficiency: A. with points inside the production possibilities frontier. B. with points on and outside the production possibilities frontier. C. with points on the production possibilities frontier. D. with points outside the production possibilities frontier. E. with points inside and on the production possibilities frontier.

A C

What does increasing marginal opportunity costs mean? A. Increasing the production of a good requires larger and larger decreases in the production of another good. B. Increasing the production of a good requires smaller and smaller decreases in the production of another good. C. Production is not occurring on the production possibilities frontier. D. The economy is unable to produce increasing quantities of goods and services. E. Increasing the production of a good requires decreases in the production of another good. What are the implications of this idea for the shape of the production possibilities frontier? A. The production possibilities frontier will be bowed inward. B. The production possibilities frontier will have a positive slope. C. The production possibilities frontier will be bowed outward. D. The production possibilities frontier will be a straight line. E. The production possibilities frontier will have a negative slope.

A C

What is a free market? A. A free market is one where the government does not control the production of goods and services. B. A free market is one without property rights. C. A free market is one with perfect equality. D. A free market is one where the government restricts how a good or service can be produced. E. A free market is one where the government restricts how a factor of production can be employed. In what ways does a free market economy differ from a centrally planned economy? Unlike a free market economy, A. centrally planned economies do not trade internationally. B. centrally planned economies do not use money. C. centrally planned economies have no government. D. centrally planned economies have no government restrictions. E. centrally planned economies have extensive government controls.

A E

According to an article on Phillyburbs.com, some farmers in rural Pennsylvania are causing a "stink" by using pig manure for fertilizer. The farmers purchase the pig manure, which is an organic fertilizer, from a nearby pork processing plant and spread it across the fields where they grow corn and soybeans. The article asserts that the farmers switched to pig manure because of the skyrocketing price of chemical fertilizers. Some of the residents of Milford, however, have complained about the smell, but the "farmers are likely protected under Pennsylvania's Right to Farm Act, which allows farmers to engage in practices that are common to agriculture." In their switch to the organic pig manure fertilizer, farmers responded to A. the rising price of chemical fertilizers. B. falling prices of pig manure. C. rising prices of corn and soybeans. D. rising incomes. According to the Pennsylvania Right to Farm Act, do the farmers or the townspeople have the property rights to the smell of the air around the farms? (Some of the residents did ask the township to urge the farmers to plow-under the manure to reduce its stench.) According to the Pennsylvania Right to Farm Act, ▼ farmers townspeople have the property rights to the smell of the air around the farms because the Pennsylvania Right to Farm Act allows A. farmers to engage in practices that are common to agriculture. B. townspeople to complain. C. townspeople to boycott the offending farmers. D. farmers to plow-under the manure to reduce its stench.

A farmers A

Alberto Chong of the University of Ottawa and several colleagues conducted an experiment to test the efficiency of government postal services around the world. They mailed letters to nonexistent businesses in 159 countries and kept track of how many of the letters were returned. Was this test most relevant to evaluating the productive efficiency or the allocative efficiency of these postal services? Source: Alberto Chong, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer, "Letter Grading Government Efficiency," Journal of the European Economic Association, Vol. 12, No. 2, April 2014, pp. 277-299. This test that Albert Chong and his colleagues carried out was most relevant for evaluating the A. allocative efficiency of these postal services because the test was designed to measure how much it cost to send and return letters in various countries. B. allocative efficiency of these postal services because the test was designed to measure how often and how quickly the letters sent were returned. C. productive efficiency of these postal services because the test was designed to measure how often and how quickly the letters sent were returned. D. productive efficiency of these postal services because the test was designed to measure how much it cost to send and return letters in various countries.

Complete the following statement: "When there is a shortage LOADING... of a good A. decreasing prices lead to a change in demand. B. consumers compete against one another by bidding the price upward. C. as prices increase, consumer demand more of a particular good. D. producers react to shortages by lowering prices. E. as prices increase, producers are driven to produce less.

Economists assume that the only reason people take the actions they do is in response to economic incentives. A. True B. False

From the list below, select the variable that will cause the demand curve to shift: A. Technology and productivity B. Consumer income C. The cost of raw materials D. The number of firms in the market

If you and your neighbor both grow oranges and grapefruits and you are better than your neighbor at picking both oranges and grapefruits, there can be no advantage to you in specializing in growing only one type of fruit and trading with your neighbor for the other. A. True B. False

In a market system, how does society decide who will receive the goods and services produced? A. The government determines the goods and services produced. B. Who receives the goods and services produced depends largely on how income is distributed. C. Firms determine who receives the goods and services produced. D. Consumers determine who receives the goods and services produced.

In a market system, what determines how goods and services will be produced? A. Consumers, firms, and the government determine together how goods and services will be produced. B. Firms determine how goods and services will be produced. C. Consumers determine how goods and services will be produced. D. The government determines how goods and services will be produced.

Suppose we can divide all the goods produced by an economy into two types: consumption goods and capital goods. Capital goods, such as machinery, equipment, and computers, are goods used to produce other goods. Is it likely that the production possibilities frontier LOADING... in this situation would be a straight line: LOADING... click on the icon for an example or bowed out: LOADING... click on the icon for an example? A. The production possibilities frontier would likely be a straight line because not all resources are equally well suited to produce both consumption and capital goods. B. The production possibilities frontier would likely be bowed out because not all resources are equally well suited to produce both consumption and capital goods. C. The production possibilities frontier would likely be a straight line because resources are likely equally well suited to produce both consumption and capital goods. D. The production possibilities frontier would likely be bowed out because resources are likely equally well suited to produce both consumption and capital good

Suppose you were building an economic model forecasting the number of physicians and physicians assistants likely to be needed in 2020. Should your model take into account the growth of the home medical device industry? A. No, because as more time passes the growth of the home medical device industry will provide better data to use. B. Yes, because the greater the growth in the use of home medical devices, the less patients will require the services of physicians and physician assistants. C. Yes, because of the newness of the industry. D. No, because estimates of the growth of the medical device industry by 2020 are bound to be imprecise.

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. A. greater B. smaller C. more proportional D. more instant

What do economists mean by market equilibrium? A. A condition where a good is abundantly available. B. A market outcome where quantity supplied is equal to quantity demanded. C. A condition where a good is no longer scarce.

When the demand curve shifts to the right, A. the equilibrium price will decrease and the equilibrium quantity will increase. B. the equilibrium price and quantity will both increase. C. the equilibrium price and quantity will both decrease. D. the equilibrium price will increase and the equilibrium quantity will decrease.

Whether carried out by an individual or a country, production beyond the production possibilities frontier A. happens as a result of forced saving. B. is not physically possible. C. is possible only through trade. D. can occur by acquiring more productive resources.

Which of the following is a correct statement about a mixed economy? A. In a mixed economy, the government makes all economic decisions. B. In a mixed economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources. C. In a mixed economy, most economic decisions are made by the government but markets plays a significant role in the allocation of resources. D. In a mixed economy, all economic decisions are made in markets.

Which of the following statements about economics as a social science is correct? A. Economics uses normative analysis but not positive analysis. B. Economics studies the actions of individuals. C. Economics considers human behavior only in the context of business. D. Economics is not useful in analyzing the effects of government policy.

[Related to the Don't Let This Happen to You] A student writes the following: "Increased production leads to a lower price, which in turn increases demand." This student must be referring to A. an increase in demand. B. an increase in quantity demanded.

[Related to the Chapter Opener] In addition to making cars, Tesla planned to open a new factory in Nevada in 2016 to make batteries, including home storage battery packs. Source: Mike Ramsey and Anne Steele, "Tesla Loss Widens as Spending Jumps," Wall Street Journal, May 6, 2015. The opportunity cost of Tesla's investment in a new battery factory in Nevada is A. equal to the cost of inventory for the new battery factory. B. what the company considered to be the best foregone option to the factory. C. measured in terms of the competition Telsa will present to exisiting firms. D. indeterminate since their plans are not detailed well enough.

Which of the following statements about an economic variable is correct? A. An economic variable must either be the price of a good or service or the quantity of a good or service. B. An economic variable is something measurable that can have different values. C. An economic variable must always be a positive number. D. An economic variable is always measured in dollars. Which of the following statements about a hypothesis is correct? A. A hypothesis is a statement that could in principle turn out to be incorrect. B. To be called a hypothesis, a statement must first be shown to be correct. C. A hypothesis is another name for a model. D. A hypothesis will always incorporate a value judgment.

B A

[Related to the Chapter Opener] A news story discussing Sanadu's prospects for success selling its home medical devices observes, "Another challenge will be getting doctors on board with the idea of patients bringing them information from home." Source: Timothy Hay, "Gadgets Bring Diagnostics into the Home," Wall Street Journal, February 18, 2015. An economic incentive for doctors to accept information supplied by their patients is that it would A. likely cast doubt on the accuracy of information provided by other sources. B. reduce the amount of time spent testing and evaluating the patients' condition in the office or hospital where they were treated. C. provide them with an added source of income if they can get kick-backs from the medical device companies. D. allow individuals more inclusion in the care process. An incentive that doctors would have to NOT accept the patient-provided information is that A. they may doubt the accuracy of information provided directly by patients. B. it would force doctors to treat the same number or patients at a lower cost, or more patients in the same amount of time. C. doctors would be able to charge fees for tests and procedures performed by their patients. D. it would reduce the amount of time spent testing and evaluating the patients' condition.

B A

If demand and supply both increase, which of the following will definitely occur? A. The equilibrium price will decrease. B. The equilibrium quantity will increase. C. The equilibrium quantity will decrease. D. The equilibrium price will increase. If demand decreases and supply increases, which of the following will definitely occur? A. The equilibrium price will increase. B. The equilibrium price will decrease. C. The equilibrium quantity will increase. D. The equilibrium quantity will decrease.

B B

[Related to the Chapter Opener] Suppose the demand for smartwatches increases rapidly during 2016. At the same time, six more firms begin producing smartwatches. A student remarks that, because of these events, we can't know for certain whether the price of smartwatches will rise or fall. The student's remarks (that, because of these events, we can't know for certain whether the price of smartwatches will rise or fall) is A. incorrect. When there is an increase in supply and an increase in demand, the new equilibrium price will be unambiguously higher. B. correct. When there is an increase in supply and an increase in demand, the new equilibrium quantity increases but whether the equilibrium price increases or decreases is unknown. C. incorrect. When there is an increase in supply and an increase in demand, the new equilibrium price will be unambiguously lower. D. correct. When there is an increase in supply and an increase in demand, the change in both new equilibrium price and equilibrium quantity are unknown. The new equilibrium quantity will be A. point C. B. either point C or point D. C. between points E and F. D. point D.

B B

What is the outcome of enforcing contracts and property rights in a market system? A. no effect on economic activity B. increased economic activity C. an unpredictable but definite effect on economic activity D. decreased economic activity If a market system functions well, which of the following is necessary for the enforcement of contracts and property rights? A. powerful political connections B. action by government to prevent the exercise of certain property rights C. an independent court system D. All of the above.

B C

[Related to Making the Connection] In the court case over whether anyone could use Doyle's character of Sherlock Holmes without paying a fee, Judge Posner argued that the first Sherlock Holmes story was written in 1887, so allowing the author's descendants to continue to claim a copyright to the character raised the possibility of "perpetual, or at least nearly perpetual, copyright." The judge also noted that the U.S. Constitution had only given Congress the authority to grant copyright for a limited time. Source: Leslie S. Kling v. Conan Doyle Estate, Ltd (7th Cir. 2014), media.ca7.uscourts.gov. Allowing an author and his or her descendants to have a copyright forever on a book or character has disadvantages including: A. lost revenue from competing authors. B. the reduction of new books, movies, and television series based on existing characters that results from copyright periods. C. the inability to track the heirs and descendents to pay the copyright. D. the problems associated with terminating the copyright after so many years have passed. Allowing an author and his or her descendants to have a copyright forever on a book or character has advantages including: A. decreased payments to some authors using other authors' characters to produce new books. B. revenue that generates tax payments. C. incentives that it provides for writers to write books that they might not have written. D. a more fully developed cast of characters that can be used in future books.

B C

State whether each of the following events will result in a movement along the demand curve for McDonald's Big Mac hamburgers or whether it will cause the curve to shift. The price of Burger King's Whopper hamburger declines. This will cause A. demand for McDonald's Big Mac hamburgers to increase. B. demand for McDonald's Big Mac hamburgers to decrease. C. a movement along the demand curve for McDonald's Big Mac hamburgers. McDonald's eliminates $1.00 off coupons. This will cause A. demand for McDonald's Big Mac hamburgers to shift to the right. B. demand for McDonald's Big Mac hamburgers to shift to the left. C. a movement along the demand curve for McDonald's Big Mac hamburgers. KFC raises the price of a bucket of fried chicken. This will A. shift the demand for McDonald's Big Mac hamburgers to the right. B. shift the demand for McDonald's Big Mac hamburgers to the left. C. cause a movement along the demand curve for McDonald's Big Mac hamburgers. The U.S. economy enters a period of rapid growth in incomes. This will cause A. demand for McDonald's Big Mac hamburgers to shift to the left if they are inferior goods. B. demand for McDonald's Big Mac hamburgers to shift to the right if they are inferior goods. C. a movement along the demand curve for McDonald's Big Mac hamburgers if they are normal goods.

B C A A

Suppose that your local police department recovers 100 tickets to a big NASCAR race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 A.M. Monday morning at City Hall. Suppose that your college decides to give away 1,000 tickets to the football game against your school's biggest rival. The athletic department elects to distribute the tickets by giving them away to the first 1,000 students who show up at the department's office at 10 a.m. the following Monday. a. The groups of people that are most likely to get the tickets will be those for whom the expected marginal ▼ benefits costs of going to the department's office on Monday morning are greater than the expected marginal ▼ .benefits costs What is the actual cost and also the opportunity cost of distributing the tickets this way? A. The cost of travel to the department's office. B. The activities that cannot be done (such as earning money at work) when one is standing in line. C. The cost of people blocking traffic in and around the department's office building. D. All of the above. E. A and B only. Productive efficiency occurs when a good or service (such as the distribution of tickets) is produced at the lowest possible cost. Is this an efficient way to distribute the tickets? ▼ . This is A. an equitable way to distribute the tickets because everyone has an equal chance of getting a ticket. B. not an equitable way to distribute the tickets because there may be enough tickets for faculty and staff. C. not an equitable way to distribute the tickets because some students who really want them may be unable to go and get them. D. an equitable way to distribute the tickets because the students who really want them will be able to go and get them.

Ben Cost D No C

A free market is a market with ________ government restrictions on how a good or service can be produced or sold and with ________ government restrictions on how a factor of production can be employed. A. many; many B. many; few C. few; few D. few; many

A journalist wrote the following about the effects of falling gasoline prices: "With lower prices, demand rises and people consume more." Source: Jeff Sommer, "Cheaper Oil, Fatter Wallets and a National Opportunity," New York Times, December 20, 2014. Briefly explain whether you agree with the journalist's analysis. The journalist's statement is A. not true because a decrease in the price of gasoline would result in an increase in demand, not an increase in quantity demanded, for gasoline. B. true because a decrease in the price of gasoline would result in an increase in demand, not an increase in quantity demanded, for gasoline. C. not true because a decrease in the price of gasoline would result in an increase in quantity demanded, not an increase in demand, for gasoline. D. true because a decrease in the price of gasoline would result in an increase in quantity demanded, not an increase in demand, for gasoline.

A primary difference between macroeconomics and microeconomics is A. There are no true differences between microeconomics and macroeconomics. B. Microeconomics is concerned with market economies while macroeconomics is concerned with centrally-planned economies. C. Microeconomics examines individual markets while macroeconomics examines the economy as a whole. D. Microeconomics is concerned with present decisions while macroeconomics is concerned with future decisions.

An article in the Wall Street Journal noted that an "increase in the price of oil quickly reduces demand for oil." Source: Josh Zumbrun, "Oil's Plunge Could Help Send Its Price Back Up," Wall Street Journal, February 22, 2015. This statement is A. accurate because a change in the price of oil affects the demand for oil, but does not affect the quantity of oil demanded. B. incorrect because a change in the price of oil affects the demand for oil, but does not affect the quantity of oil demanded. C. incorrect because a change in the price of oil affects the quantity of oil demanded, but does not affect the demand for oil. D. accurate because a change in the price of oil affects the quantity of oil demanded, but does not affect the demand for oil.

Consider an organization that exists to help the poor. The members of the organization are discussing alternative methods of aiding the poor, when a proponent of one particular method asserts that: "If only one poor person is helped with this method, then all our time and money would have been worth it." If you were a member of the organization, what reply best represents clear economic thinking? This attitude A. is the most logical because it is focussed on helping even one person. B. acknowledges the importance of considering all the alternatives. C. ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people. D. recognizes the fact that since the organization is a charity, there is an opportunity cost based on the square root of other peoples' needs.

During the 1928 presidential election campaign, Herbert Hoover, the Republican candidate, argued that the United States should only import those products that could not be produced here. Do you believe that this would be a good policy? Explain. A. This is not a good policy because it does not necessarily result in countries producing those goods for which they have an absolute advantage. B. This is a good policy because countries would only produce those goods that they can make at lower opportunity cost than other countries. C. This is not a good policy because it does not necessarily result in countries producing those goods for which they have a comparative advantage. D. This is a good policy because countries would only produce those goods that cannot be made elsewhere. E. This is not a good policy because it does not allow countries to import those goods that are scarce.

Economists refer to the necessity of holding all variables other than price constant in constructing a demand curve as the A. substitution effect. B. law of demand. C. ceteris paribus condition. D. income effect.

Evaluate the following argument: "Adam Smith's analysis is based on a fundamental flaw: He assumes that people are motivated by self-interest. But this isn't true. I'm not selfish, and most people I know aren't selfish." A. This statement is based on the misconception that Smith's analysis applies to every aspect of life. B. This statement correctly identifies how Smith's analysis ignored charitable acts of giving and benevolence. C. This statement is based on the misconception that following your self-interest and being selfish are the same thing. D. This statement is based on the misconception that Smith's analysis provides no role for government guidance. E. This statement is based on the misconception that Smith's analysis applies to firms and households.

From the list below, select the variable that will cause the supply curve to shift: A. Prices of related goods B. Population and demographics C. The cost of raw materials D. Consumer income

In a paper written by Bentley College economists Patricia M. Flynn and Michael A. Quinn, the authors state: "We find evidence that Economics LOADING... is a good choice of major for those aspiring to become a CEO [chief executive officer]. When adjusting for size of the pool of graduates, those with undergraduate degrees in Economics are shown to have had a greater likelihood of becoming an S&P 500 CEO than any other major." A list of famous economics majors published by Marietta College includes business leaders Warren Buffet, Donald Trump, Ted Turner, and Sam Walton, as well as former presidents George H.W. Bush, Gerald Ford, and Ronald Reagan. Sources: Patricia M. Flynn and Michael A. Quinn, "Economics: A Good Choice of Major for Future CEOs," Social Science Research Network, November 28, 2006; and Famous Economics Majors, Marietta College, Marietta Ohio, May 15, 2012. Why might studying economics be particularly good preparation for being the top manager of a corporation or a leader in government? A. Economics is less of an issue as you climb the corporate ladder because you usually hire accountants to handle your money. B. Management and politics have more to do with public relations than economics. C. Economics teaches us how to look at the tradeoffs involved in every decision. D. Economics is just as valuable to a cashier as it is for a CEO.

Market price is determined by A. demand only. B. supply only. C. both supply and demand. D. neither supply nor demand.

Relative to a market economy, a centrally-planned economy would be expected to be A. better at productive efficiency but not allocative efficiency because costs can be controlled by the government but consumer tastes cannot. B. better at allocative efficiency but not productive efficiency because consumers can be forced to buy in government shops but firm managers can be wasteful because there is no profit motive. C. better at neither productive efficiency nor allocative efficiency because the absence of market-imposed competition negates the need of firms to satisfy consumer wants or produce using the lowest-cost methods. D. better at both productive efficiency and allocative efficiency because entrepreneurial greed doesn't exist there.

Scarcity implies that every society and every individual face trade-offs because scarcity means that A. people refuse to limit their wants. B. government is unwilling to redistribute wealth. C. human wants are greater than what available resources can produce. D. people are greedy and won't share with others.

Suppose economists develop an economic model ... and find that "it works great in theory, but it fails in practice." Which of the following should the economists do next? A. They should retest the current model, as there may have been an error in the testing methods the first time. B. They should leave the model as is. A model does not need to explain or predict real world events. C. They should revise the model in light of its failure to explain or predict real world events. D. None of the above.

The Food and Drug Administration (FDA) is part of federal government's Department of Health and Human Services. Among its other functions, the FDA evaluates the safety and effectiveness of drugs and medical devices. FDA approval had to be granted before OraSure was allowed to market its home HIV test. In a centrally planned economy, the government decides how resources will be allocated. In a market economy, the decisions of households and firms interacting in markets allocate resources. The regulation of the production and sale of drugs and medical devices in the United States is an example of how resources are allocated in a A. centrally planned economy because the government controls whether the drug can be used. B. market economy because the FDA is made up of elected officials. C. market economy because the drug development, and the resources allocated to the development, occurs in the market. D. centrally planned economy because the FDA is part of the government and this involves central planning.

What type of economic analysis is concerned with the way things ought to be? A. Positive Analysis B. Rational Behavior C. Normative Analysis D. Marginal Analysis

Why are models based on assumptions? A. Because models are not intended to analyze real-world events. B. Because models are very different from theories. C. Because models have to be simplified to be useful. D. Because models are only concerned about questions of equity, not question of efficiency.

Trade-offs force society to make choices, particularly when answering the following three fundamental questions: A. One, what goods and services will be produced domestically? Two, how will the goods and services be produced? Three, is the distribution of goods and services fair? B. One, what goods and services will be produced in foreign countries? Two, who will produce the goods and services? Three, who will receive the goods and services produced? C. One, what goods and services will be produced? Two, how will the goods and services be produced? Three, who will receive the goods and services produced? D. One, what goods and services will be produced? Two, how will the goods and services be produced? Three, is the distribution of goods and services fair?

[Related to Chapter Opener] A number of industry analysts believe that smartphone prices will decline over the next few years. Sources: Phil Goldstein, "IDC: Smartphone Shipments to Hit 1.4B in 2015, and Prices Will Keep Falling," fiercewireless.com, December 2, 2014; and Rob van der Meulen," Gartner Says Global Devices Shipments to Grow 2.8 Percent in 2015," gartner.com, March 19, 2015. If these forecasts are correct, the demand for smartwatches will A. increase and shift to the right because smartphones and smartwatches are substitutes. B. increase and shift to the left because smartphones and smartwatches are complements. C. decrease and shift to the left because smartphones and smartwatches are substitutes. D. decrease and shift to the right because smartphones and smartwatches are complements.

[Related to Making the Connection] Both smartwatches and smartphones use applications, or "apps," which are software that consumers can download and use to play games, check stock market prices, and read news stories, among many other activities. Particularly useful apps are called "killer apps." One industry analyst remarked, "There is no one killer app for smartwatches." Source: Daniel Matte and Kevin McCullagh, "Will Smartwatches Be a Hit?" Wall Street Journal, May 10, 2015. If the analyst's observation is correct, it makes smartwatches A. closer substitutes for smartphones if there is a "killer app" for smartwatches. B. weaker complements for smartphones if there is no "killer app" for smartwatches. C. closer substitutes for smartphones if there is no "killer app" for smartwatches. D. weaker complements for smartphones if there is a "killer app" for smartwatches.

[Related to Solved Problem #3] In The Wealth of Nations, Adam Smith discussed what has come to be known as the "diamond and water paradox": "Nothing is more useful than water: but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it." LOADING... Click in the icon for a reference diagram. It is possible for the price of water to be much lower than the price of diamonds if which of the following is true? A. The supply of diamonds and water are the same. B. The supply of diamonds is a horizontal line. C. The supply of water is greater than the supply of diamonds. D. The supply of water is a vertical line. E. The supply of diamonds is greater than the supply of water.

[Related to Solved Problem #4] The demand for pears is highest during summer and lowest during winter. Yet pear prices are normally lower in summer than in winter. What must be happening to the supply of pears, from winter to summer, for the equilibrium price to fall? LOADING... Click on the icon to experiment with inward and outward shifts in supply and demand. Note the change in equilibrium price and quantity. A. The supply increases, but less than the demand increases. B. The supply does not change. C. The supply increases more than the demand increases. D. The supply for pears decreases.

[Related to the Making the Connection] Since 1979, China has had a policy that allows couples to have only one child. (There are exceptionslong dashcouples in which both partners are single children may be allowed two children.) The population demographics have changed between the young, middle-aged, and old, and between young males and females. Between 2000 and 2010, the share of the population under 14 slumped from 23% to 17%, and to ensure that the lone child is a son, the number of newborn males relative to females has increased. Source: "China's Family Planning: Illegal Children Will Be Confiscated" and "China's Population: Only and Lonely," Economist, July 21, 2011. How has the one-child policy changed the relative demand for goods and services in China? A. One would only expect the relative demand for baby related products to be reduced. B. The Chinese economy is still largely a command economy; market forces, and hence relative demands, are insignificant. C. It has undoubtedly shifted away from goods and services appealing to youthful buyers, particularly youthful female buyers. D. The sheer number of consumers in China, coupled with that country's very rapid growth, renders relative demand shifts totally insignificant.

[Related to Don't Let This Happen to You] In the 1950s, the economist Bela Balassa compared 28 manufacturing industries in the United States and Britain. In every one of the 28 industries, Balassa found that the United States had an absolute advantage LOADING.... In these circumstances, would there have been any gain to the United States from importing any of these products from Britain? Explain. A. Even with an absolute advantage, the United States would have benefited from importing those products for which Britain had the same opportunity cost. B. Since the United States had an absolute advantage in all 28 industries, it had more bargaining power and would have gained from importing all of these products from Britain. C. Even with an absolute advantage, the United States would have benefited from importing those products for which Britain had a comparative advantage. D. Even with an absolute advantage, the United States would have benefited from importing those products that Britain could have produced at lower total cost. E. Since the United States had an absolute advantage in all 28 industries, it also had a comparative advantage in each industry and would not have gained anything from importing any of these products from Britain.

In the United States, to receive a medical license, a doctor must complete a residency program at a hospital. Hospitals are not free to expand their residency programs in a particular medical specialty without approval from a Residency Review Committee (RRC), which is made up of physicians in that specialty. A hospital that does not abide by the rulings of the RRC runs the risk of losing its accreditation from the Accreditation Council for Graduate Medical Education (ACGME). The ACGME and the RRCs argue that this system makes it possible to ensure that residency programs do not expand to the point where they are not providing residents with high-quality training. Sources: Brian Palmer, "We Need More Doctors, Stat!" Slate, June 27, 2011; Sean Nicholson, "Barriers to Entering Medical Specialties," Wharton School, September 2003. This system may help protect consumers by ensuring that A. hospitals do not police themselves. B. accrediting bodies maintain command and control. C. future doctors receive high-quality training. When it comes to assessing how this system affects the financial interests of doctors and the well being of consumers, it may be that the former gain more simply because A. there are far fewer of them, hence each stands to gain much from supply restrictions. B. they are the sellers of health care, and sellers always benefit more than buyers.

C A

The law of demand is the assertion that A. the quantity demanded of a product is directly related to its price. B. changes in price and changes in quantity demanded move in the same direction. C. the quantity demanded of a product is inversely related to its price. D. the demand for a product is negatively related to its price. An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More specifically, A. the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in consumers' purchasing power. B. the substitution effect is the decrease in quantity demanded because consumer tastes have changed and the income effect is the decrease in quantity demanded because consumer incomes have fallen. C. the substitution effect is the decrease in quantity demanded because the consumers' purchasing power is reduced and the income effect is the decrease in quantity demanded owing to the fact that the product is more expensive relative to other goods. D. the substitution effect is the decrease in quantity demanded because there are fewer consumers and the income effect is the decrease in quantity demanded because consumer incomes failed to increase.

C A

Which of the following is the textbook's definition of a supply schedule? A. a curve that shows the relationship between the price of a product and the quantity of the product demanded B. the quantity of a good or service that a firm is willing to supply at a particular price C. a table that shows the relationship between the price of a product and the quantity of the product supplied D. None of the above. Which of the following is the textbook's definition of a supply curve? A. the quantity of a good or service that a firm is willing to supply at a particular price B. a curve that shows the relationship between the price of a product and the quantity of the product supplied C. a table that shows the relationship between the price of a product and the quantity of the product supplied D. None of the above.

C B

Economists use models A. to prove that theories are true. B. to disprove economic data. C. to answer questions and analyze issues. D. to describe the real world exactly. Economic data is used A. to take the place of an economic model. B. to prove that a model is true. C. to test models. D. only if all relevant data is available.

C C

Productive efficiency means that A. a good or service is produced as quickly as possible. B. every good or service is produced up to the point where marginal benefit is equal to marginal cost. C. a good or service is produced at the lowest possible cost. D. every good or service is distributed fairly. Allocative efficiency means that A. a good or service is produced as quickly as possible. B. every good or service is distributed fairly. C. every good or service is produced up to the point where marginal benefit is equal to marginal cost. D. a good or service is produced at the lowest possible cost.

C C

Suppose the president is attempting to decide whether the federal government should spend more on research to find a cure for heart disease. What is the opportunity cost of spending more money to find a cure for heart disease? A. The total explicit cost of the research to cure heart disease. B. The cost of the Medicare/Medicaid program. C. The reduction in funding for research to cure other diseases. D. The monetary value of a human life. E. The reduction in future health-related costs of heart disease. How should policymakers determine the amount of money that should be allocated for research curing heart disease? They should base their decision on A. the value of the total benefit of research on curing other diseases. B. the number of people who have heart disease compared to the number of people who have other diseases. C. whether the last dollar devoted to research on heart disease results in more benefit than the last dollar spent on research for curing other diseases. D. the number of people who die from heart disease compared to the number of people who die from other diseases. E. the value of the total benefit of the research on heart disease.

C C

[Related to Making the Connection] Nobel Prize winning economist Kenneth Arrow of Stanford University once wrote that the argument that the outcomes in a market system, "may be very different from, and even opposed to, intentions is surely the most important intellectual contribution that economic thought has made." Source: Kenneth J. Arrow, "Economic Equilibrium," Encyclopedia of the Social Sciences, 1968. Encyclopedia.com. (May 23, 2015). It is possible for the outcomes in a market system to be different from what firms and consumers intended them to be because A. firms and consumers do not directly communicate. B. most firms and consumers do not really understand the market system. C. neither firms nor consumers are directly interested in increasing economic efficiency or the standard of living of the average person. D. both firms and consumers are directly interested in increasing economic efficiency and the standard of living of the average person. This idea is an important intellectual contribution because A. without the interaction of firms and consumers in markets, there would be few goods and services produced. B. most consumers and firms have the same objective, which is to increase economic efficiency and the standard of living of the average person. C. the interaction of firms and consumers in markets produces outcomes that are economically efficient and that promote the economic growth that results in rising living standards. D. if it were not for the interaction of firms and consumers in markets, a central planning body would have to organize the market.

C C

According to Adam Smith, which of the following is necessary for the proper functioning of the market system? A. For markets to work, the government should help citizens make the right decisions. B. For markets to work, people and the government need to coordinate their decisions. C. For markets to work, people must be free to pursue their self-interest. D. For markets to work, people should take into account how their decisions affect society as a whole. According to Adam Smith, which of the following is the instrument the invisible hand uses to direct economic activity? A. government regulations B. costs C. financial markets D. prices

C D

Which of the following statements about positive analysis is correct? A. Positive analysis involves value judgments. B. Positive analysis can be used to determine whether policies are good or bad. C. Positive analysis is concerned with what is. D. Positive analysis is concerned with what ought to be. Which of the following statements about normative analysis is correct? A. Normative analysis is concerned with what is. B. Normative analysis measures the costs and benefits of different courses of action. C. Normative analysis should not involve value judgments. D. Normative analysis is concerned with what ought to be.

C D

A news story titled "Auto Sales Zoom, Helped by Low Prices at the Pump" includes a graphic showing increasing car and truck sales in one panel and decreasing gasoline prices in the other panel. Source: "Auto Sales Zoom, Helped by Low Prices at the Pump," Wall Street Journal, December 3, 2014. The graphic described assumes that autos and gasoline are A. complements, because if the price of gasoline increases, the demand for its complements, cars and trucks, increase. B. substitutes, because if the price of gasoline decreases, the demand for its substitutes, cars and trucks, increase. C. substitutes, because if the price of gasoline decreases, the demand for its substitutes, cars and trucks, decrease. D. complements, because if the price of gasoline decreases, the demand for its complements, cars and trucks, increase.

According to a news story about the International Energy Agency, the agency forecast that "the current slide in [oil] prices won't [reduce] global supply." Source: Sarah Kent, "Plunging Oil Prices Won't Dent Supply in Short Term," Wall Street Journal, December 12, 2014. Would a decline in oil prices ever cause a reduction in the supply of oil? A. No, the supply of oil is fixed. B. Yes, a decline in oil prices would reduce both the quantity of oil supplied and the supply of oil. C. Yes, a decline in oil prices would reduce the supply of oil, but not the quantity of oil supplied. D. No, a decline in oil prices would reduce the quantity of oil supplied, not the supply of oil.

In a market system, how does society decide what goods and services will be produced? A. Firms alone determine what goods and services will be produced. B. What goods and services will be produced is determined by a vote of consumers. C. The government decides what goods and services will be produced. D. Consumers, firms, and the government determine what goods and services will be produced by the choices they make.

In late 2014, oil prices were falling but some energy traders were convinced that oil prices would begin to rise within a few months. According to a news story, these expectations were causing some "traders to put oil in storage while they wait for prices to rise." Source: Nicole Friedman, "Saudi Arabia's Surprise Move Spurs Quirk for U.S. Oil Futures," Wall Street Journal, November 4, 2014. Holding some oil in storage rather than selling it would A. increase the supply of oil, shifting it to the right. B. increase the supply of oil, shifting it to the left. C. decrease the supply of oil, shifting it to the right. D. decrease the supply of oil, shifting it to the left.

In many cities, firms that own office buildings can renovate them for use as residential apartments. According to a news story, in many cities "residential rents are surpassing office rents." Source: Eliot Brown, "Developers Turn Former Office Buildings Into High-End Apartments," Wall Street Journal, May 7, 2014. The response to an increase in residential rents would be A. a decrease in the supply of office space, shifting it to the right. B. an increase in the supply of office space, shifting it to the right. C. an increase in the supply of office space, shifting it to the left. D. a decrease in the supply of office space, shifting it to the left.

Lawrence Summers served as secretary of the treasury in the Clinton administration and as director of National Economic Council in the Obama administration. He has been quoted as giving the following moral defense of the economic approach. "There is nothing morally unattractive about saying: We need to analyze which way of spending money on health care will produce more benefit and which less, and using our money as efficiently as we can. I don't think there is anything immoral about seeking to achieve environmental benefits at the lowest possible costs." Source: David Wessel, "Precepts from Professor Summers," Wall Street Journal, October 17, 2002. It would be more moral to reduce pollution, A. not taking the cost into account because pollution is potentially harmful to our health. B. taking the cost into account because reducing pollution often reduces economic growth. C. not taking the cost into account because pollution reduction is typically associated with large benefits. D. taking the cost into account because money spent on pollution reduction is not available for other worthy activities. E. taking the cost into account because the total cost of reducing pollution is likely enormous.

What is the role of an entrepreneur? A. to bring together the factors of productionlong dashlabor, capital, and natural resources B. to take risks C. to operate a business that produces a good or service D. All of the above.

When economists speak of a surplus, they mean a situation in which A. the market price is above the equilibrium price. B. the quantity supplied exceeds quantity demanded. C. firms have unsold goods piling up. nothing nothing D. all of the above. E. A and B only.

Which of the following events would create economic growth, that is, shift the production possibilities frontier outward? A. An increase in the available labor. B. An increase in the available natural resources. C. An increase in technology that affects the production of both goods. D. All of the above.

Which of the following statements about the idea that people are rational is correct? A. The idea assumes that consumers and firms always make correct decisions. B. The idea assumes that consumers and firms take into account the costs of their actions but ignore the benefits. C. The idea assumes that consumers and firms take into account the benefits of their actions but ignore the costs. D. The idea assumes that consumers and firms use all available information as they act to achieve their goals.

Why do entrepreneurs play a key role in a market system? A. They influence income distribution through taxes and transfer payments. B. They determine who will receive goods and services. C. They supply labor as a factor of production. D. They bring together factors of production. E. They determine what goods and services are produced.

[Related to Making the Connection] The chapter mentions that in 1965 married women with children worked an average of 32 hours per week while men worked an average of only 4 hours on houseworklong dasha total of 36 hours of housework. More recently, the estimated average weekly hours of housework for women declined to 18 while the hours worked by men increased to 10long dasha total of 28 hours of housework. Source: U.S. Bureau of Labor Statistics, "American Time Use Survey." Does the decrease in the total number of hours of housework-from 36 to 28-mean that families are willing to live in messier homes? A. Yes, because homes are larger now and would require more hours of housework to keep a home clean. B. No, because women have just decided to let men do more work. C. Yes, because families are too busy now to worry about a clean house. D. No, because there are more labor saving devices so less time is required.

[Related to Don't Let This Happen to You] Warren Buffet is the Chief Executive Officer of the investment firm Berkshire Hathaway and one of the wealthiest people in the world. In an editorial in the Wall Street Journal, Buffet argued that economic policies in the United States should be designed so that people who are willing to work receive enough income to live a "decent lifestyle." He argued that an expansion of the Earned Income Tax Credit (EITC) would be superior to an increase in the minimum wage as a means to reach this goal. The EITC is a program under which the federal government makes payments to low-income workers. Source: Warren Buffet, "Better Than Raising the Minimum Wage," Wall Street Journal, May 21, 2015. Is Buffet correct that it is the role of the federal government to make sure people who work will have enough income to live a "decent lifestyle"? A. This is a positive economic question, so the answer is a matter of the norms or values of the person answering. B. He is correct because only the government can make sure people who work will have enough income to live a "decent lifestyle." C. He is incorrect because if the government provides, people will not have an incentive to support themselves. D. This is a normative economic question, so the answer is a matter of the norms or values of the person answering.

________ is used to describe how changes in price affect a consumer's purchasing power, and ________ is used to describe how a change in price affects the quantity demanded of a good by making it more or less expensive than substitute goods. A. The substitution effect; the law of demand B. The law of demand; the income effect C. The substitution effect; the income effect D. The income effect; the substitution effect

Absolute advantage is the ability of an individual, a firm, or a country to A. consume more goods or services than others at lower costs. B. reach a higher production possibilities frontier by lowering opportunity costs. C. produce a good or service at a lower opportunity cost than other producers. D. produce more of a good or service than competitors using the same amount of resources. If a country has a comparative advantage in the production of a good, then that country A. has a lower opportunity cost in the production of that good. B. should allow another country to specialize in the production of that good. C. also has an absolute advantage in the production of that good. D. All of the above are true.

D A

According to Forbes magazine, in 2015 Bill Gates was the world's richest person with wealth of $79.2 billion. Source: "The World's Billionaires," forbes.com, March 2, 2015. Does Bill Gates face scarcity? A. Yes, because there is a limit to the income even billionaires can earn. B. No, because if a billionaire cannot get the goods and services they want, someone else can get it for them. C. No, because billionaires can have anything that money can buy. D. Yes, because even though billionaires' financial resources enable them to afford a much greater array of goods and services than those less wealthy, their financial resources are not infinite. Which of the following statements is true? A. All individuals face a scarcity of time and need to make choices how to allocate it. B. Most individuals face a scarcity of time, but few experience a scarcity of other resources. C. While resources are scarce, most people don't own resources and therefore do not face a scarcity of them. D. Some individuals experience scarcity because they have not learned to live within their means.

D A

When does productive efficiency occur? A. Productive efficiency occurs when an economy achieves equity. B. Productive efficiency occurs when an economy no longer relies on voluntary exchange. C. Productive efficiency occurs when production is in accordance with consumer preferences. D. Productive efficiency occurs when a good or service is produced at the lowest possible cost. When does allocative efficiency occur? A. Allocative efficiency occurs when production is in accordance with consumer preferences. B. Allocative efficiency occurs when an economy no longer relies on voluntary exchange. C. Allocative efficiency occurs when an economy achieves equity. D. Allocative efficiency occurs when a good or service is produced at the lowest possible cost.

D A

[Related to Making the Connection] According to an article in the Wall Street Journal in 2015, "Apple Inc.'s surging smartphone sales in China may have busted a myth: that many Chinese consumers couldn't, or wouldn't, shell out for an iPhone." The article noted that iPhone sales were growing faster in China than in the United States, Europe, or other high-income countries. Source: Juro Osawan, "China's Middle-Class Propels Apple's iPhone Sales," Wall Street Journal, April 28, 2015. a. Sales of iPhones would be likely to be growing faster in China than in the United States and in other high-income countries because A. the Chinese are more familiar with iPhones because of the extensive marketing there. B. the Chinese government has promoted iPhones as the best value for consumers. C. iPhones will have a lower price in China since that is where they are made. D. Chinese consumers may not currently own a smartphone, so that Apple might have an easier time convincing consumers to switch from using a regular cellphone to an iPhone. Many industry analysts were surprised by Apple's strong sales in China because A. industry analysts from the United States and other Western countries are not as familiar with Chinese markets as they are with markets in their own countries. B. the Chinese government has discouraged consumers from buying iPhones. C. rapid growth of the population in China has resulted in significant decreases in Chinese income per capita. D. Android devices were expected to have the strongest sales. Compared to forecasting sales in the United States, forecasting sales in countries such as China would be A. easier because the Chinese government controls all of the available data. B. harder because marketing efforts in China have been uncoordinated. C. easier because rapid growth of the population in China has resulted in significant decreases in Chinese income per capita. D. harder because it can be difficult to know which products Chinese consumers will spend their increased incomes on.

D A D

If a surplus exists in a market, we know that the actual price is A. above the equilibrium price, and the quantity demanded is greater than the quantity supplied. B. below the equilibrium price, and the quantity supplied is greater than the quantity demanded. C. below the equilibrium price, and the quantity demanded is greater than the quantity supplied. D. above the equilibrium price, and the quantity supplied is greater than the quantity demanded. If a shortage exists in a market, we know that the actual price is A. above the equilibrium price, and the quantity demanded is greater than the quantity supplied. B. below the equilibrium price, and the quantity demanded is greater than the quantity supplied. C. below the equilibrium price, and the quantity supplied is greater than the quantity demanded. D. above the equilibrium price, and the quantity supplied is greater than the quantity demanded.

D B

Which of the following statements is correct? A. A business has multiple locations, while a company has only a single location. B. A company is owned by one person, while a firm is owned by more than one person. C. A business is always larger than a firm. D. Economists use the terms firm, company, and business interchangeably. Which of the following statements is correct? A. An invention is the practical application of an innovation. B. An innovation is the practical application of an invention. C. The word "technology" and the word "invention" have the same meaning. D. The word "technology" and the word "innovation" have the same meaning.

D B

Which of the following are the two key groups of participants in the circular flow of income? A. domestic residents and foreign residents B. government and financial institutions C. savers and borrowers D. households and firms In a simple circular-flow model, there are flows of _________ and flows of _________. A. factors of production; goods and services B. funds received from the sale of factors of production; spending on final goods and services C. Both (a) and (b) are correct. D. None of the above; there are no flows in the circular flow of income.

D C

Which of the following is the correct definition of demand schedule? A. the demand for a product by all the consumers in a given geographic area B. the quantity of a good or a service that a consumer is willing to purchase at a particular price C. a curve that shows the relationship between the price of a product and the quantity of the product supplied D. a table that shows the relationship between the price of a product and the quantity of the product demanded Which of the following is the correct definition of demand curve? A. the demand for a product by all the consumers in a given geographic area B. the quantity of a good or a service that a consumer is willing to purchase at a particular price C. a curve that shows the relationship between the price of a product and the quantity of the product demanded D. a table that shows the relationship between the price of a product and the quantity of the product demanded

D C

State government Medicaid programs provide medical insurance to poor and disabled people. Under federal law, the programs must provide reimbursements to people who use any prescription drug that has been approved as effective by the U.S. Food and Drug Administration (FDA). In recent years, pharmaceutical firms have developed new prescription drugs that cost as much as $1,000 per pill to treat Hepatitis C, a liver disease. A news story notes that, "State Medicaid programs are particularly sensitive to annual cost increases...[because] coverage is paid for, in part, out of state budgets, which have to be balanced every year." Source: Joseph Walker, "Expensive Hepatitis C Medications Drive Prescription-Drug Spending," Wall Street Journal, March, 10, 2015; and Margot Sanger-Katz, "$1,000 Hepatitis Pill Shows Why Fixing Health Costs Is So Hard," New York Times, August 2, 2014. When new prescription drugs are introduced with much higher prices than existing drugs, state governments face a trade-off between A. funding pharmaceutical firms and funding other firms. B. the death of individuals from one type of illness compared to another. C. those with Medicaid and those without Medicaid. D. a reduction in spending on another worthwhile program or an increase in taxes. Do you agree with the federal law requiring that Medicaid programs must cover every drug that has FDA approval? A. No, because such spending is definitively not the best use of state governments' scarce resources. B. This is a positive economic issue that people will often disagree about. C. Yes, because such spending is definitively the best use of state governments' scarce resources. D. This is a normative economic issue that people will often disagree about.

D D

What is the basis for trade? A. Absolute advantage. B. Available resources. C. Economic growth. D. Comparative advantage. E. Efficiency. How can a country gain from specialization and trade? A. A country can specialize by using all available resources to invest in capital goods to promote economic growth. B. A country can specialize in producing that for which it has an absolute advantage and then trade for other needed goods and services. C. A country can specialize in producing that which is most scarce and then trade for other needed goods and services. D. A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services. E. A country can specialize by using all available resources to produce goods and services to avoid trading with other countries.

D D

[Related to the Making the Connection] The British historian Thomas Macaulay once remarked that copyrights are "a tax on readers." Copyrights are a 'tax' on readers in the sense that A. securing a new copyright requires the payment of a fee to the government by the artist. B. the government collects the tax progressively to promote fairness in the tax code. C. the government explicitly adds a sales tax on creative works to cover the copyright. D. copyrights limit of the supply of related creative work which results in higher prices. If copyrights are a 'tax' on readers, governments provide a legal framework to enforce them because A. the government collects a large amount of revenue from the tax. B. the government likes to tax the people any chance it gets. C. the government needs to solve its debt problem by enacting new taxes. D. copyrights provide needed protection for authors and creators of movies or other artistic works.

D D

What are the two main categories of participants in markets? A. Firms and banks. B. Domestic participants and international participants. C. Households and entrepreneurs. D. Firms and households. E. Households and the government. Which participants are of greatest importance in determining what goods and services are produced? A. The government. B. Entrepreneurs. C. Firms. D. The financial sector. E. Households.

D E

In The Wonderful Wizard of Oz and his other books about the Land of Oz, L. Frank Baum observed that if people's wants were modest enough, most goods would not be scarce LOADING.... According to Baum, this was the case in Oz: "There were no poor people in the Land of Oz, because there was no such thing as money... Each person was given freely by his neighbors whatever he required for his use, which is as much as anyone may reasonably desire. Some tilled the lands and raised great crops of grain, which was divided equally among the whole population, so that all had enough. There were many tailors and dressmakers and shoemakers and the like, who made things that any who desired them might wear. Likewise there were jewelers who made ornaments for the person, which pleased and beautified the people, and these ornaments also were free to those who asked for them. Each man and woman, no matter what he or she produced for the good of the community, was supplied by the neighbors with food and clothing and a house and furniture and ornaments and games. If by chance the supply ever ran short, more was taken from the great storehouses of the Ruler, which were afterward filled up again when there was more of any article than people needed... You will know, by what I have told you here, that the Land of Oz was a remarkable country. I do not suppose such an arrangement would be practical with us. " Source: L. Frank Baum, The Emerald City of Oz, pp. 30-31, First edition published in 1910. Do you agree with Baum that the economic system in Oz wouldn't work in the contemporary United States? A. The system in Oz would work. There is no scarcity in Oz or in the United States. B. The system in Oz would work. The United States has more resources than Oz to fulfill the people's wants. C. The system in Oz wouldn't work. People in the United States are less willing to give freely to their neighbors. D. The system in Oz wouldn't work. Even without modest wants, goods are not scarce in the United States. E. The system in Oz wouldn't work. The wants of people in the United States exceed the resources available to fulfill those wants.

In colonial America, the population was spread thinly over a large area, and transportation costs were very high because it was difficult to ship products by road for more than short distances. As a result, most of the free population lived on small farms where they not only grew their own food but also usually made their own clothes and very rarely bought or sold anything for money. Why were the incomes of these farmers likely to rise as transportation costs fell? As transportation costs fell, A. production costs decreased. Using comparative advantage, the farmers then were able to specialize, producing more of those goods for which they had higher opportunity cost, selling excess goods in the market for money. With income from trade, living standards increased. B. production costs decreased. The farmers then were able to produce more of everything, often selling excess goods in the market for money. With income from trade, living standards increased. C. the farmers gained access to new markets and customers. Examining shortages, the farmers produced those goods that were most scarce. As they traded for other goods, their incomes and living standards increased. D. the farmers gained access to new markets and customers. Using absolute advantage, the farmers produced those goods that they could make the most of. As they traded for other goods, their incomes and living standards increased. E. the farmers gained access to new markets and customers. Using comparative advantage, the farmers specialized, producing those goods for which they had lower opportunity cost. As they traded for other goods, their incomes and living standards increased.

Which of the following is not scarce according to the economic definition? A. Oil. B. Workers. C. Time. D. Tutorial services. E. None of the above.

[Related to the Making the Connection] The Making the Connection explains that there are both positive and normative elements to the debate over whether medical schools should charge tuition and whether hospitals should continue to pay residents who pursue primary care but not residents who specialize. Which of the following economic statistics would be the most useful in evaluating the positive elements in this debate? A. Poverty rates by geographic region. B. Age distribution characteristics of the population by geographic region. C. Physician incomes by specialty and geographic region. D. Med school tuition rates, applications, and enrollments. E. All of the above. Assuming that these statistics are available or could be gathered, are they likely to resolve the normative issues in this debate? A. Yes, the quantitative analysis of hard economic data leaves no unsettled questions. Subjective considerations cannot override objective analysis. B. No, because normative issues involve value judgments that incorporate an individual's full range of experiences, beliefs, and emotions.

E B

What is absolute advantage? A. The ability to produce a good or service at a lower opportunity cost than other producers. B. The gain from consuming a product whose benefit is greater than its cost. C. The gain from selling a product for more than it costs to produce that product. D. The ability to use all available resources to produce output. E. The ability to produce more of a good or service than competitors using the same amount of resources. What is comparative advantage? A. The gain from selling a product for more than it costs to produce that product. B. The ability to use all available resources to produce output. C. The ability to produce a good or service at a lower opportunity cost than other producers. D. The ability to produce more of a good or service than competitors using the same amount of resources. E. The gain from consuming a product whose benefit is greater than its cost.

E C

What are private property rights? Private property rights are: A. the rights individuals and firms have to the exclusive use of intellectual property but not tangible, physical property. B. the rights individuals have to the exclusive use of intellectual property and firms have to the exclusive use of tangible, physical property. C. the rights individuals but not firms have to the exclusive use of tangible, physical property and intellectual property. D. the rights individuals and firms have to the exclusive use of tangible, physical property but not intellectual property. E. the rights individuals and firms have to the exclusive use of tangible, physical property and intellectual property. What role do they play in the working of a market system? Private property rights: A. encourage a significant number of people to be willing to risk funds by investing them in business. B. encourage firms to spend money on research and development. C. are the basis for international trade. D. determine what goods and services will be produced. E. both a and b. Why are independent courts important for a well-functioning economy? Independence is necessary for courts: A. to make their decisions based on the law. B. to make their decisions free of influence from other parts of the government. C. to make their decisions free of intimidation by criminal gangs. D. to make their decisions free of influence from people with powerful political connections. E. all of the above.

E E E

Which of the following is a positive economic statement? A. If minimum wage rates rise, then unemployment will rise. B. Full employment policies should be pursued. C. We should tax the wealthy more and use the money to provide services for the poor. D. The government should do something to help the homeless.

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? A. People respond to economic incentives. B. People are rational. C. People make decisions at the margin.

People respond to economic incentives.

A 50-cent-per-pack tax on cigarettes will reduce smoking by teenagers by 12 percent. This represents ▼ .Pos/Norm The federal government should spend more on AIDS research. This represents ▼ positive analysis normative analysis .

Pos Norm

Leonard Fleck, a philosophy professor at Michigan State University, has written, "When it comes to health care in America, we have limited resources for unlimited health care needs. We want everything contemporary medical technology can offer that will improve the length or quality of our lives as we age. But as presently healthy taxpayers, we want costs controlled." Source: Leonard Fleck, Just Caring: Health Care Rationing and Democratic Deliberation. New York: Oxford University Press, 2009. Is it necessary for all economic systems to limit services such as health care? ▼ y/n A market system prevents people from getting as many goods and services as they want due to which of the following? A. The government because it allocates the goods and services. B. Their income. C. Both A and B. D. Neither A nor B.

Y B

[Related to the Making the Connection] Suppose that oil prices sharply increase, while more cities pass laws banning the use of plastic bags at stores. (Oil is an input into the production of plastic bags.) a. The new equilibrium price of plastic bags will A. depend on the relative shifts of demand and supply. B. be lower than the initial equilibrium price. C. be higher than the initial equilibrium price. D. be the same as the initial equilibrium price. The new equilibrium quantity of plastic bags will A. be the same as the initial equilibrium quantity of plastic bags. B. be lower than the initial equilibrium quantity of plastic bags. C. depend on the relative shifts of demand and supply. D. be higher than the initial equilibrium quantity of plastic bags. The new equilibrium quantity will be A. between points B and D. B. point D. C. point C. D. between points E and F.

a B A

Efficiency means that goods are distributed in a way that ▼ fair, quick, max benefits to society , while equity means that goods are distributed in a way that ▼ fair, quick, max benefits to society

maximizes benefits to society fiar

Indicate whether each of the following is primarily a microeconomic LOADING... issue or a macroeconomic LOADING... issue. a. The effect of higher cigarette taxes on the quantity of cigarettes sold. This is a ▼ microeconomic macroeconomic issue. The effect of higher income taxes on the total amount of consumer spending. This is a ▼ microeconomic macroeconomic issue. The reasons for the economies of East Asian countries growing faster than the economies of sub-Saharan African countries. This is a ▼ microeconomic macroeconomic issue. The reasons for low rates of profit in the airline industry. This is a ▼ microeconomic macroeconomic issue.

micro macro macro micro

A firm operating in a market economy has a strong incentive to be productively efficient and allocatively efficient because the former enables it to ▼ max total output, min prod cost while the latter ensures it of ▼ ample revenues public adulation .

minimize production costs ample revenues

Determine if these are a change in supply or quantity supplied To take advantage of high prices for snow shovels during a very snowy winter, Alexander Shovels, Inc., decides to increase output. _ . b. The success of Apple's iPod leads more firms to begin producing digital music players. _ . c. In the six months following Hurricane Katrina, production of oil in the Gulf of Mexico declined by 25 percent. _ .

quantity supplied change in supply change in supply

Firms are likely to produce more of a good or service when its price _ (rises or falls) and less of a good or service when its price _ (rises or falls) .

rises falls

Which of the following will cause an outward (rightward) shift in supply? A. A technological improvement. B. The cost of an input increases. C. A decline in labor productivity. D. A reduction in consumer incomes.

A technological improvement.

According to the theory of comparative advantage, specialization and free trade will benefit: A. all trading partners who specialize in goods where they have comparative advantage B. only those countries that have a monopoly in a particular resource C. only the trading party with an absolute advantage in the production of a good D. only the party that specializes the most

all trading partners who specialize in goods where they have comparative advantage

An increase in demand causes an increase in the equilibrium price. The increase in equilibrium price will then cause an increase in supply. A. False B. True

The basis for trade is comparative advantage, not absolute advantage. A. True B. False

Which of the following covers the study of topics such as inflation or unemployment? A. Macroeconomics B. Microeconomics C. Both microeconomics and macroeconomics give equal emphasis to these problems. D. None of the above.

A good for which demand increases as income rises is ________, and a good for which demand increases as income falls is ________. A. an inferior good; a normal good B. a normal good; an inferior good C. a complement; a substitute D. a substitute; a complement Goods and services that can be used for the same purpose are ________, and goods and services that are used together are ________. A. inferior goods; normal goods B. normal goods; inferior goods C. complements; substitutes D. substitutes; complements

B D

An unexpected frost in the orange groves of California would cause A. a decrease in the demand for orange juice, decreasing the equilibrium price. B. an increase in the demand for orange juice, increasing the equilibrium price. C. a decrease in the supply of orange juice, increasing the equilibrium price. D. an increase in the supply of orange juice, decreasing the equilibrium price.

__________ goods and services are those bought by businesses to be used to increase efficiency or enhance production. Capital Government Consumption

Capital

__ decide(s) what goods and services will be produced.

Consumers, firms, and government

According to the rationality assumption, people: A. Do not intentionally make decisions that would leave them worse off. B. Do not ever take into account the interests or well-being of others. C. Can never consider each of the most relevant alternatives. D. Use rules of thumb to make choices.

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? A. How do we produce the products? B. What products do we produce? C. Who consumes the products?

How do we produce the products?

Dr. Strangelove's theory is that the price of mushrooms is determined by the activity of subatomic particles that exist in another universe parallel to ours. When the subatomic particles are emitted in profusion, the price of mushrooms is high. When subatomic particle emissions are low, the price of mushrooms also is low. Is it possible to test this theory? ▼ .Y/N

Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority? North Korea United States France Italy

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? A. Product markets B. Financial markets C. Factor markets D. Free markets

Product markets

Imagine that the next time the Indianapolis Colts play the New England Patriots at Lucas Oil Stadium in Indianapolis, Colts star quarterback Andrew Luck has a temporary lack of judgment and plans to sell Colts memorabilia during the game because he realizes that he can sell five times more Colts products than any other player. Likewise, imagine that you are a creative and effective manager at work and that you tell your employees that during the next six months, you plan to clean the offices because you can clean five times better than the cleaning staff. Both you and Andrew are making an error in judgment by assuming that specialization should be based upon ▼ .relative absolute

absolute

Ms. Boulware is the best lawyer and the best secretary in town. She has: A. an absolute advantage in both jobs B. a comparative advantage in both jobs C. has a comparative advantage in being a secretary

an absolute advantage in both jobs

An economist remarks that "the cost of consuming a book is the combination of the retail price and the opportunity cost of the time spent reading." Source: Craig L. Garthwaite, "Demand Spillovers, Combative Advertising, and Celebrity Endorsements," American Economic Journal: Applied Economics, Vol. 6, No. 2, April 2014, p. 78. The cost of ▼ buying consuming a book is the price you pay to buy the book, but the cost of ▼ buying consuming a book would include the time spent reading the book.

buying consuming

[Related to the Making the Connection] In discussing dividing up household chores, Emily Oster, an economist at the University of Chicago, advises that: "No, you shouldn't always unload the dishwasher because you're better at it." Source: Emily Oster, "The Wrong Person Is Probably Doing the Dishes in Your Home," Slate, November 21, 2012. Even if you are better at unloading the dishwasher than your spouse, you shouldn't always be the one to unload it because -your spouse will act as a 'free rider' if you do all the work. -your opportunity cost of unloading the dishwasher is nonexistent. -absolute advantage is what matters for specialization not comparative advantage. -you may be even better at some other household task and must consider the opportunity cost.

Macroeconomics can be used to understand all of the topics listed below, except: A. how a consumer decides between the purchase of two different cars B. how the national economy works C. what causes economic booms and recessions D. national unemployment trends

how a consumer decides between the purchase of two different cars

"I was going to drop my psychology course so I could concentrate on my other courses, but I had already put so much time into the course I decided not to drop it." Is your friend's reasoning correct or incorrect? Your friend's reasoning is ▼ .

inc

Economists believe that an individual or firm should continue any activity until: A. marginal benefit is equal to marginal cost. B. marginal benefit is less than marginal cost. C. marginal benefit is greater than marginal cost.

marginal benefit is equal to marginal cost.

The United States economy is best classified as a: mixed economy. market economy. centrally planned economy.

mixed

Identify whether each of the following transactions will take place in the factor market or in the product market and whether households or firms are supplying the good or service or demanding the good or service. George buys a Tesla Model S. This takes place in the ▼ market. The household ▼ supplies demands the good and the firm ▼ supplies demands the good. The households __ the labor and the firm __ the labor.

product demand/supplies supply/demand

Which of the following best describes scarcity? A. Unlimited wants exceed the limited resources available. B. Wants cannot be fulfilled and thus all goods must be rationed. C. Prices of goods are very high. D. Markets cannot properly allocate resources.

Which of the following is consistent with the law of supply? A. An increase in the market price of MP3 players causes an increase in the production of MP3 players. B. A reduction of the price of salt led to a 5 percent increase in the quantity of salt consumed. C. Fewer passengers chose to travel by airplane after the terrorist strikes of 9/11. D. The state of California has less grape regulation than New York, and grape production is lower in New York.

An increase in the market price of MP3 players causes an increase in the production of MP3 players.

In what type of economy does the government decide how most economic resources will be allocated? A. Centrally planned economy B. Market economy C. Mixed economy

Centrally planned economy

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? A. Increasing factory size B. Combining production steps C. The division of labor

The division of labor

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? A. The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information. B. The price and quantity of corn will rise. C. The price and quantity of corn will fall. D. The quantity of corn will rise, but the effect on equilibrium price cannot be determined without more information. E. The quantity of corn will fall, but the effect on equilibrium price cannot be determined without more information.

The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.

Which of the following is critical to the success of the market system? A. To allow individuals or firms to have exclusive use of their property B. To prevent individuals from buying or selling their property depending on circumstances C. To allow the government to determine the optimal use of property

To allow individuals or firms to have exclusive use of their property

Which of the following represents an inferior good? When consumer income increases, the demand for bologna decreases. When consumer income decreases, the demand for steak decreases. When consumer income increases, the demand for tea increases. When consumer income decreases, the demand for aspirin is unchanged.

When consumer income increases, the demand for bologna decreases.

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. Rationality B. Marginal analysis C. A market D. Normative economics

a market

Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium: A. after an adjustment period that varies. B. quickly. C. slowly. D. after a protracted negotiation process.

after an adjustment period that varies.

A product produced in a foreign country and purchased by residents of the home country is called: A. an import B. an export C. self-sufficiency D. outsourcing

an import

Economics: A. is concerned with how people respond to incentives B. is a natural science C. is unconcerned with value judgments D. deals with assumptions and is therefore unrealistic

is concerned with how people respond to incentives

The stock of computers, factory buildings and machine tools used to produce goods is known as: A. physical capital B. financial capital C. human capital D. technology

physical capital

At the market equilibrium price: A. quantity demanded equals quantity supplied. B. quantity and price are equal. C. everyone can buy the product. D. demand equals supply.

quantity demanded equals quantity supplied.

In a price system: A. relative prices change constantly to reflect changes in supply and demand. B. relative prices change infrequently due to transactions costs. C. relative prices are set by central planners based on projected supply and demand. D. relative prices do not signal information about changes in market conditions.

relative prices change constantly to reflect changes in supply and demand.

One of the great benefits of trade is A. that it makes it possible for society to become better off by increasing its production but not its consumption. B. that it makes it possible for society to become better off by increasing its consumption. C. that it provides society what it desires most in life even if it does not enhance the means for achieving its goals. D. that it makes it possible for society to become better off if individuals, firms, and countries specialize in producing goods and services for which they have an absolute advantage.

According to the law of demand, A. when the price of a product falls, quantity demanded will decrease. B. when the price of a product increases, quantity demanded will increase. C. there is an inverse relationship between price and quantity demanded. .D. All of the above.

What is the name given to the development of a new good? Invention Innovation Entrepreneurship Financial capital

Invention

What is the name given to the highest-valued alternative that must be given up to engage in any activity? Opportunity cost A trade-off Scarce alternative Production possibilities frontier

Opportunity cost

__ is concerned with what is, and __ is concerned with what ought to be. Economics is about __ , which measures the costs and benefits of different courses of action.

Positive analysis normative analysis positive analysis

What are copyrights designed to accomplish? A. Protect intellectual property rights B. Prevent entrepreneurs from earning excessive profits C. Eliminate unnecessary duplication whenever it arises D. Discourage the proliferation of the written word

Protect intellectual property rights

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. A. The quantity of apples demanded will increase as the price of apples falls. B. The demand for apples will increase as the price of apples falls. C. The quantity of apples demanded will increase at every price. D. The quantity of apples supplied will increase at every price, increasing the price of apples.

The quantity of apples demanded will increase as the price of apples falls.

In what type of economy does the government decide how economic resources will be allocated? A. a centrally planned economy B. a market economy C. a mixed economy

a centrally planned economy

One of the first steps in deciding whether to complete your education is to: A. evaluate the marginal cost and marginal benefit of that decision. B. consider only the easiest options at a given point in time. C. evaluate the total amount of your investment up to this point.

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. A. firms B. households C. financial intermediaries

firms

Contracts, insurance, patents and accounting rules are: A. inventions that make a market work better B. things that came naturally with the creation of markets C. ideas that are unnecessary in a free market D. enforced only in centrally planned economies

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): A. invisible hand. B. government official. C. central bank.

invisible hand.

The level of total investment by firms in new machinery and equipment helps to determine how rapidly the economy grows. This is a __ issue. However, to understand how much new machinery and equipment firms decide to purchase, one must analyze the incentives individual firms face, which is a __ issue.

macro micro

Macroeconomics is concerned with all of the following except: A. political party affiliation B. unemployment rates C. inflation rates D. standard of living

political party affiliation

Economics is the study of choice under conditions of: A. scarcity B. supply C. opportunity D. abundant resources

scarcity

The principle of opportunity cost evolves from the concept of: scarcity wealth poverty consumer spending

scarcity

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. A. smaller B. greater C. more instant D. more proportional

smaller

The role of the entrepreneur always involves: taking risks playing it safe working for others high impact sales

taking risks

All of the following scenarios depict the characteristics of complements except: A. the price of coffee increases and the demand for cream increases. B. the price of bacon decreases and the demand for eggs increases. C. the price of automobiles decreases and the demand for tires increases. D. the price of tennis racquets increases and the demand for tennis shoes decreases.

the price of coffee increases and the demand for cream increases.

According to the law of demand, A. when the price of a product falls, quantity demanded will decrease. B. there is an inverse relationship between price and quantity demanded. C. when the price of a product increases, quantity demanded will increase. D. All of the above.

Scarcity is central to the study of economics because it implies that A. society must make decisions at the margin. B. every choice involves an opportunity cost. C. wants are unlimited. D. economic agents are rational.

Macroeconomics is the study of A. how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices. B. why the U.S. has spent so much money on wars and government surveillance of its own citizens. C. the economy as a whole, including topics such as inflation, unemployment, and economic growth. D. the economy on a state-by-state basis, covering areas affected by the Commerce Clause.

Other things remaining equal, the law of demand says that higher prices will lead to: A. a smaller quantity demanded and lower prices to a larger quantity demanded. B. a larger quantity demanded and lower prices to a larger quantity demanded. C. a larger quantity demanded and lower prices to a smaller quantity demanded. D. a smaller quantity demanded and lower prices to a smaller quantity demanded.

a smaller quantity demanded and lower prices to a larger quantity demanded.

In the United States, property rights: A. are guaranteed by two amendments to the U.S. Constitution B. are guaranteed by some state governments, but not all C. are prohibited by the federal government D. exist in the markets but are not enforced

are guaranteed by two amendments to the U.S. Constitution

Market price is determined by _________. A. both supply and demand B. supply only C. demand only D. neither supply nor demand

both supply and demand

A production possibilities frontier (PPF) is A. a curve that illustrates the demand of two goods for the average consumer. B. a curve showing the generally attainable combinations of two products that may be produced with all planned or potential, yet undeveloped technology. C. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology. D. a curve that shows the potential productive capabilities of the frontier (defined as the area outside of cities) of a developing economy.

The primary difference between absolute and comparative advantage is A. absolute advantage refers to the ability to produce a good or service at a lower opportunity cost and comparative advantage refers to the ability to produce more of a good or service using the same amount of resources. B. absolute advantage can never change while comparative advantage depends on the relative cost of a good's resources. C. absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost. D. absolute advantage is a concept that was utilized in communist countries and comparative advantage is a capitalist idea.

The resources provided by nature and used to produce goods and services are also known as: A. natural resources B. factors of production C. physical capital D. labor resources

natural resources

When nations specialize in their comparative advantage and engage in trade: A. overall poverty levels increase B. 100 percent of the population will benefit C. the variety of goods for sale declines D. overall standards of living increase

overall standards of living increase

Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then: A. the equilibrium price and quantity both increase. B. the equilibrium price and quantity both decrease. C. the equilibrium price increases and the equilibrium quantity decreases. D. the equilibrium price decreases and the equilibrium quantity increases.

the equilibrium price and quantity both increase.

A perfectly competitive market is a market that meets the conditions of A. (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market. B. (1) many buyers and sellers, (2) all firms selling differentiated products, and (3) no barriers to new firms entering the market. C. (1) many buyers and sellers, (2) all firms selling identical products, and (3) significant barriers to new firms entering the market. D. (1) few buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls A. rationality. B. scarcity. C. the market. D. economics.

Economists assume that people are rational in the sense that A. they make decisions based on total, rather than marginal, variables. B. they generally make the correct choices. C. they use all available information as they take actions intended to achieve their goals. D. they do not respond to economic incentives.

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when A. marginal benefit is maximized. B. marginal benefit is greater than marginal cost. C. marginal benefit equals marginal cost. D. marginal cost is zero.

Equity is A. always achieved by the market. B. an exactly equal distribution of income. C. the fair distribution of economic benefits. D. when poorer people's income is growing more rapidly than more wealthy people's income.

Absolute advantage is the ability of an individual, firm, or country to: A. produce more of a good or service than competitors using the same amount of resources B. produce a good or service at a lower opportunity cost than other producers C. consume more goods or services than others at lower costs D. reach a higher production possibilities frontier by adding additional resources

produce more of a good or service than competitors using the same amount of resources

Property rights are A. the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it. .B. the rights individuals or firms have to the exclusive use of their property within individual culturally defined norms which are inconsistent in each area of the United States. C. the rights individuals or firms have to the exclusive use of their property, excluding the right to buy or sell it. D. the rights government has to the exclusive use of all property, including the right to buy or sell it.

Property rights are A. the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it. B. the rights government has to the exclusive use of all property, including the right to buy or sell it. C. the rights individuals or firms have to the exclusive use of their property, excluding the right to buy or sell it. D. the rights individuals or firms have to the exclusive use of their property within individual culturally defined norms which are inconsistent in each area of the United States.

Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational? A. We cannot assume that this pricing decision was rational because we do not have enough information to make an assumption. B. When we assume the managers at Microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationality. C. Microsoft's choice was rational: the price will maximize profit. D. Microsoft's choice cannot be rational: the price is clearly more than most people are willing and able to pay.

The distinction between substitutes and complements is A. substitute goods are used together while complementary goods are used for the same purposes. B. substitute goods are used for the same purposes while complementary goods are used together. C. when income increases, demand for a substitute good increases while demand for a complementary good falls. D. when income increases, demand for a complementary good decreases while demand for a substitute good increases.

Consider the figure to the right and assume that it is the market for health-care services. When the "baby boomer" generation retires, the number of people who require health care increases by 30%, and, as a result, the number of health-care providers also increases, but by only 25%. What is the effect on the price of health-care services over time? A. It increases because demand increased by less than supply. B. It decreases because demand increased by less than supply. C. It increases because demand increased by more than supply. D. It decreases because demand increased by more than supply.

According to the law of supply, A. there is a positive relationship between price and quantity supplied. B. as the price of a product increases, firms will supply less of it to the market. C. as the price of a product increases, firms will supply more of it to the market. D. A and C only

Economics is a social science because A. it is based on studying the actions of individuals. B. it applies the scientific method to the study of the interactions among individuals. C. it considers human behaviorlong dashparticularly decision-making behavior. D. all of the above.

Opportunity cost is A. when consumers and firms use all available information as they act to achieve their goals. B. the idea that because of scarcity, producing more of one good or service means producing less of another good or service. C. when unlimited wants exceed the limited resources available to fulfill those wants. D. the highest valued alternative that must be give up to engage in an activity.

In the United States, who receives the goods and services produced depends largely on __

how income is distributed

The grading system plays an important role in student learning. In their book Effective Grading: A Tool for Learning and Assessment in College, Barbara Walvoord and Virginia Anderson state that "grading infuses everything that happens in the classroom." They also argue that grading "needs to be acknowledged and managed from the first moment that an instructor begins planning a class." Source: Barbara E. Walvoord and Virginia Johnson Anderson, Effective Grading: A Tool for Learning and Assessment in College, 2nd edition, San Francisco: Jossey-Bass, 2010, p. 1. The grading system used by a teacher can affect the incentives of students to learn the course material by A. altering the payoffs to achieving success on the various components of the course. B. doubling the points assigned to each component of the course. C. uniformly weighting all course components. D. none of the above since student performance is based on innate intelligence.

The federal government subsidizes some loans to college students. Typically, the more students who participate in these programs and the more they borrow, the higher the cost to the federal government. In 2011, President Barack Obama convinced Congress to pass these changes to the federal student loan programs: (1) Payments were capped at 10 percent of a borrower's discretionary income; (2) any unpaid balances for people working for the government or in the non-profit sector were forgiven after 10 years; and (3) people working in the private sector had their loans forgiven after 20 years. Sources: Allesandra Lanza, "What Obama's 2016 Budget Proposal Means for Student Borrowers," usnews.com, February 11, 2015; and Josh Mitchell, "Student-Debt Forgiveness Plans Skyrocket, Raising Fears Over Costs, Higher Tuition," Wall Street Journal, April 22, 2014. As a result of these changes in the federal student loan program, you would predict that the total amount students' borrowed under these programs would have A. increased because the terms of repayment have been made more generous. B. not changed because people already have loans. C. not changed because many people do not want to work for the government. D. decreased because people may be worried about their ability to repay. As part of his 2016 federal budget proposals, President Obama recommended significant changes to the federal student loan programs. Given your answer to the previous question, do you think President Obama was likely to have recommended changes that would increase, or changes that would decrease, the payments that borrowers would have to make? President Obama was likely to have recommended changes that would A. increase the payments that borrowers would have to make so that the government servicing costs would be constant. B. decrease the payments that borrowers would have to make so that more students would take loans and go to school. C. increase the payments that borrowers would have to make so that the government would be paid back sooner. D. decrease the payments that borrowers would have to make so that students will make payments for a longer period. President Obama and his advisers have failed to correctly forecast the effects of the 2011 changes to the loan programs because they A. underestimated the number of students who would take advantage of the programs. B. did not realize that the programs changed the economic incentives for students and their families. C. overestimated the number of students who would take advantage of the programs. D. did not realize that the programs would make it more likely that students would borrow more.

A C A

Consider the following statement: "The problem with economics is that it assumes that consumers and firms always make the correct decisions. But we know that everyone makes mistakes." What is the most correct response to this statement? A. Economics does assume that consumers and firms always make the correct decisions. B. Economics assumes that consumers and firms are rational, not that they always make the right decisions. C. Economics is a proven field of study, and it has already solved this problem. D. Economics has a lot of problems such as those that caused the Great Recession.

Opportunity cost is A. when consumers and firms use all available information as they act to achieve their goals. B. the highest valued alternative that must be give up to engage in an activity. C. when unlimited wants exceed the limited resources available to fulfill those wants. D. the idea that because of scarcity, producing more of one good or service means producing less of another good or service.

The distinction between a normal and an inferior good is A. normal goods are used together while inferior goods are used for the same purposes. B. when income increases, demand for a normal good increases while demand for an inferior good falls. C. normal goods are used for the same purposes while inferior goods are used together. D. when income increases, demand for a normal good decreases while demand for an inferior good increases.

The primary difference between product markets and factor markets is that A. product markets produce goods for final sale while the output of factor markets is included in the purchase price of the good itself-factors are not sold. B. product markets are markets for goods, while factor markets are markets for factors of production-labor, capital, natural resources, and entrepreneurial ability. C. product markets are generally after factor markets in the distribution chain. D. product markets are markets for factors of production-labor, capital, natural resources, and entrepreneurial ability, while factor markets are markets for goods and services.

Consider the following statement: "An increase in supply decreases the equilibrium price. The decrease in price increases demand." The statement is A. true: increases in supply decrease price. Decreases in price increase demand. B. false: increases in supply decrease price. C. false: decreases in price affect the quantity demanded, not demand. D. false: increases in supply increase price. Decreases in price increase demand.

Firms choose how to produce the goods and services they sell. In many cases, firms face a trade-off between using more workers or using more machines. For example, A. a local service station has to choose whether to provide car repair services using more diagnostic computers to support their auto mechanics and fewer tools to support their auto mechanics or more tools to support their auto mechanics and fewer diagnostic computers to support their auto mechanics. B. movie studios have to choose whether to produce animated films using more highly skilled animators to draw them by hand or fewer highly skilled animators and more low-skill animators. C. many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines. D. many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer machines and more workers and a production method in China that uses more machines and fewer workers.

The Scottish philosopher Adam Smith argued in 1776 that A. unions would do a better job of coordinating the activities of buyers and sellers than prices could. B. prices would do a better job of coordinating the activities of buyers and sellers than markets could. C. prices would do a better job of coordinating the activities of buyers and sellers than guilds could. D. guilds would do a better job of coordinating the activities of buyers and sellers than prices could.

A free market exists A. only in fiction. There are no markets or economies which even come close to approaching the status of a free market. B. when the government places significant restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed. C. when the government places absolutely no restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed. D. when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.

According to the FBI Bank Crime Statistics, there were nearly 4,000 bank robberies in the United States in 2014. The FBI claims that banks have made themselves easy targets by refusing to install clear acrylic partitions, called bandit barriers, that separate bank tellers from the public. According to a special agent with the FBI, "Bandit barriers are a great deterrent. We've talked to guys who rob banks, and as soon as they see a bandit barrier, they go find another bank." Sources: U.S. Department of Justice, Federal Bureau of Investigation, "Bank Crime Statistics (BCS) Federally Insured Financial Institutions, January 1, 2014-December 31, 2014," www.fbi.gov; and Richard Cowen, "FBI: Banks Are to Blame for Rise in Robberies," NorthJersey.com, March 10, 2009. Despite this finding, many banks have been reluctant to install these barriers. Wouldn't banks have a strong incentive to install bandit barriers to deter robberies? Why, then, do so many banks not do so? A. Banks are not rational. B. Banks are not interested in the safety of their customers and employees. C. Banks would not receive any benefits from installing the barriers. D. Banks have no economic incentive to install the barriers.

Microeconomics is the study of A. how individuals and firms act altruistically to better society. B. how individuals make good decisions for themselves but hurt society. C. the economy as a whole, including topics such as inflation, unemployment, and economic growth. D. how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.

The primary difference between absolute and comparative advantage is A. absolute advantage refers to the ability to produce a good or service at a lower opportunity cost and comparative advantage refers to the ability to produce more of a good or service using the same amount of resources. B. absolute advantage can never change while comparative advantage depends on the relative cost of a good's resources. C. absolute advantage is a concept that was utilized in communist countries and comparative advantage is a capitalist idea. D. absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.

[Related to Solved Problem #1] McDonald's typically serves breakfast until only 10:30 a.m. on weekdays and 11:00 a.m. on weekends. In 2015, the company began to experiment with serving breakfast all day at various locations in San Diego. Several owners of McDonald's restaurants, however, point out that offering breakfast 24 hours a day presents two logistical problems: (1) Burgers and other meats need to be cooked at a higher temperature than eggs, so it would be difficult for employees to set the grill at the right temperature for both foods; and (2) scrambled eggs require employees to continually stir, while hamburgers don't require this attention. In addition, some customers might buy the cheaper breakfast than the more expensive lunch or dinner meals. Source: Associated Press, "McDonald's Gives All-Day Breakfast a Test Try," usatoday.com, March 30, 2015; and Susan Befield and Leslie Patton. "What So Hard About a 24/7 McMuffin?" Bloomberg Busines Week, May 12, 2013. From an economics perspective, to determine whether to serve breakfast all day, McDonald's should A. calculate whether the total cost of serving breakfast all day is large. B. compare the total revenue from serving breakfast all day with the average revenue from serving breakfast all day. C. compare the average cost of serving breakfast all day to the total cost of serving breakfast all day. D. compare the marginal revenue from serving breakfast all day with the marginal cost of serving breakfast all day. E. conduct customer surveys to better understand how its customers feel about the change. Would McDonald's decision have to be all or nothinglong dasheither serve breakfast only up to 10:30 A.M. or serve breakfast all day? A. Yes, because customers would want it to be all or nothing. B. No. The employees could learn to adjust to this situation and serve breakfast all day as well as lunch and dinner. C. Yes, because it would be difficult for employees to set the grill at the right temperature for both foods. D. No. McDonald's could evaluate serving items from the breakfast menu that could be cooked in better coordination with the dinner menu for a period after 10:30 A.M.

D D

[Related to the Making the Connection] Jay Bhattacharya and M. Kate Bundorf of Stanford University have found evidence that people who are obese and work for firms that have employer-provided health insurance receive lower wages than people working at those firms who are not obese. At firms that do not provide health insurance, obese workers do not receive lower wages than workers who are not obese. Source: Jay Bhattacharya and M. Kate Bundorf, "The Incidence of the Health Care Costs of Obesity," Journal of Health Economics, Vol. 28, No. 3, May 2009, pp. 649-58. Firms that provide workers with health insurance may pay a lower wage to obese workers than to workers who are not obese because the latter tend to be healthier and consequently A. less costly to insure and therefore employ due to their lower claim submission rate. B. more productive at work. C. experience lower rates of absenteeism and early retirement. D. all of the above. E. A and B only. Regarding the question of whether health insurance provides people with an incentive to become obese, the finding of Bhattacharya and Bundorf seems A. irrelevant since correlation does not establish causation. B. "off the wall," because it's common knowledge that obesity is a disease, like cancer. C. irrelevant since a multitude of other factors besides the presence of health insurance can cause obesity. D. relevant since the link between insurance and obesity was established while holding many other variables constant.

D D

[Related to the Making the Connection] Many universities and corporations offer a health wellness program that helps their employees improve or maintain their health and get paid (a relatively small amount) for doing so. The programs vary, but typically consist of employees completing a health assessment, receiving a healthy living program, and monitoring their monthly health activities. Corporations and universities are willing to pay employees to take care of themselves because a healthier workforce A. translates into lower costs, in part by reducing illness-related absenteeism and premature retirements. B. performs more efficiently, thereby improving overall productivity in the workplace. C. is a happier workforce and thus less likely to become confrontational with management. D. all of the above. E. A and B only. The incentive of employees to improve or maintain their health once they obtain health insurance may be ▼ neg, pos impacted.

E neg

If a country has a comparative advantage in the production of a good, then that country: A. has a lower opportunity cost in the production of that good B. has an absolute advantage in producing that good C.should allow another country to specialize in the production of that good

has a lower opportunity cost in the production of that good

Two key groups participate in markets. A _ consists of all the individuals in a home. __ are suppliers of goods and services. We can use a simple economic model called the __ to see how participants in markets are linked.

household firms circ flow diagram

Given linear demand curves, if demand and supply increase by identical amounts, then: A. the equilibrium price stays the same and the equilibrium quantity rises. B. the equilibrium price and quantity do not change. C. the equilibrium price and quantity both increase. D. the equilibrium price increases but the equilibrium quantity falls.

the equilibrium price stays the same and the equilibrium quantity rises.

Given linear demand curves, if demand increases and supply decreases, then __________. A. the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous B. the effect on the equilibrium price will be ambiguous but equilibrium quantity will increase C. the effect on the equilibrium price will be ambiguous but equilibrium quantity will decrease D. the equilibrium price will decrease but the effect on the equilibrium quantity will be ambiguous

the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous

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