AP Macroeconomic Unit 2 Summary

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ray buys a new tractor for $118000. he receives consumer surplus of $13000 in his purchase. rays willingness to pay is..

$131000

The equilibrium market price of ground hamburger meat would be

$2 per pound.

The midpoint price between $60 and $10 is

$35

Examine the graph of the market for wheat. If a drought in wheat-producing states causes the equilibrium to change from point A to point B, the change in farm revenue is

$40,000,000.

Chris is spending the summer volunteering as a lifeguard. the other job he could have had was to paint houses for $440/week. his opportunity cost of life guarding this summer is:

$440/week

According to the graph, the market wage rate for this labor market is

$5 per hour. (The market wage is determined at the point where the quantity demanded equals the quantity supplied. It is the intersection of the demand and supply curves)

Paul goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul's consumer surplus from the purchase is

$75

pat bought a new car for $15500 but was willing to pay $24000. the consumer surplus is..

$8500.

Alfred Marshall was influenced by which classical economic writer?

- Adam Smith - David Ricardo

Economic Models

- Built with assumption - diagrams & equation - omit many detail - allows to see what's really important -simplify reality to improve our understanding of it

What disciplines rely on theories to explain how facts are related?

- Economics - Physics - Medicine

How does entrepreneurship differ from the other three classical factors of production?

- Entrepreneurship cannot be measured in price per units - Discoveries of entrepreneurship are not depleted as they are used

Economic forecasts can be flawed. What is a valid reason for their failure?

- Insufficient attention is paid to the conditional nature of the forecast - Forecasts may be based on incomplete or inaccurate theory - Prediction of intangible consumer attitudes and/or emotions is difficult

Circular-flow Diagram

- Visual model of the economy - Shows how dollars flow through markets among household and firms - Markets for goods and services: Firms = seller ; Household = buyers - Markets for factors of production: Firms = buyers ; Household = sellers

Production Possibilities Frontier

- a graph - combo of output that the economy can possibly produce - given the factors of production and production technology - points outside the frontier are not feasible given the economy's resources. - the economy can produce any combo on or inside the frontier - if the point is out, the point is infeasible - if the point is inside the shade or below the line, it is inefficient - if the point is on the line, it is efficient

What is it considered to be when the quantity of a good demanded at a given price exceeds the quantity supplied?

- a shortage - excess quantity demanded

What is the condition in which the quantity of a good supplied at a given price exceeds the quantity demanded considered?

- a surplus - excess quantity supplied

What is not required for every market?

- a written set of rules for buyers and sellers - an agreed-upon place where buyers and sellers can meet - a computer for recording transactions

Positive Statements

- attempt to describe the world as it is - descriptive - confirm or refute by examining evidence

Normative Statements

- attempt to prescribe how the world should be - prescriptive

Why is economics a social science?

- because of the human dimension of scarcity - because of the understanding that humans do not respond to scarcity in isolation - because of the understanding that economics is the study of people and their choices

A multi-curve graph does which of the following?

- captures three or more variables in a two-dimensional space - captures more complex economic theories - plots separate lines on the same plane

What can lead to shifts in demand curves?

- changes in tastes - changes in consumer expectations

What can lead to a change in supply?

- changes in technology - changes in expectations - changes in input prices

What methods of pollution control have been tried in the U.S.?

- command-and-control - cap-and-trade - emission charges

The "other things being equal" clause in the law of demand covers?

- consumer incomes - consumer tastes and preferences - the price of other goods

In the law of demand what doest the "other things being equal" clause cover?

- consumer incomes - consumer tastes and preferences - the prices of other goods

How can economic theories be shown in three dimensions?

- contour lines - plotting separate lines on the same plane - drawing images in three dimensions

What will sellers do when inventories run high and above planned levels?

- cut back on the rate of output - lower prices to incentivize purchase

The effects of a prohibition are dependent upon what?

- elasticity of demand - elasticity of supply

Market prices transmit information that concern what?

- factors of production - opportunity costs of goods - scarcity

Control of climate change is likely to be a particularly difficult problem for environmental policy because?

- many countries are involved - effects of carbon emissions will last many centuries into the future - there are substantial scientific uncertainties

For the supply-and-demand model to work most efficiently, what conditions does the market need?

- many producers producing similar products - all buyers and sellers have good market information - many consumers

What is true of market equilibrium?

- market equilibrium is represented graphically by the intersection of the supply and demand curves - market equilibrium is the condition under which neither buyers nor sellers have an incentive to change their plans - market equilibrium is the condition under which the plans of buyers and sellers exactly mesh when tested in the market

Environmental problems and policies provide numerous examples of?

- market failures - government failures

What reasons explain the positive slope of the supply curve?

- producers respond to market incentives so, as the price increases, it spurs more supply - rising prices must incentivize producers to overcome opportunity costs - producers face rising costs when producing additional output in fixed-size facilities

What will sellers do when inventories run low and below planned levels?

- rebuild their inventories by increasing output - take advantage of the high demand and raise prices

Market equilibrium is?

- represented graphically by the intersection of the supply and demand curves - the condition under which neither buyers nor sellers have an incentive to change their plans - the condition under which the plans of buyers and sellers exactly mesh when tested in the market

A market economy needs no central planning agency primarily due to what economic condition?

- scarcity - market equilibrium

What effect does the formation of a queue of buyers have on sellers?

- sellers react to a queue by increasing rate of output - sellers react to a queue by increasing prices

What is an illustration of entrepreneurship?

- starting a new computer company - cutting production costs with an improved method of work in an existing factory - opening the first Domino's Pizza franchise in Tokyo

What do determinants of elasticity of demand include?

- substitute goods - time horizon of buyers

During the late 1990s, the number of single women with children who receive welfare declined sharply. At the same time, the number of single women with children below the poverty threshold decreased. This is explained by?

- the introduction of time limits for TANF payments - the reduction in the benefit reduction rate - an economic expansion during this period lead to increased employment

Karen spends $20 to hire a tutor to help her prepare for her economics final. This expense should be considered to be part of?

- the out-of-pocket cost of her college education - the opportunity cost of her college education

Human capital is?

- the skills embodied in workers - is useful in seeking new technologies and production process - requires investment to build

Why will the midpoint formula for elasticity always result in a negative number?

- the slope on the demand curve is negative - as demand decreases, price increases - as price increases, demand decreases

The change in consumption of a good that occurs when its price falls is the result of?

- the substitution effect - the income effect

What can changes in expectations cause?

- the supply curve to shift - the demand curve to shift

Why are economic theories not best understood in two dimensions?

- using only two dimensions oversimplifies the true reality - using only two dimensions limits other factors possibly present in the model

What affects income elasticity?

- whether the good is a normal good or inferior good - whether substitute goods are available

If a firm has a total revenues of $100 million, explicit costs of $90 million, and implicit costs of $20 million, its pure economic profit is?

-$10 million

A survey found that when incomes increased by 10 percent, the following changes in quantities demanded occurred: computers up by 12 percent, smartphones up by 8 percent, and calculators down by 1 percent. Calculate the income elasticity of demand for computers, smartphones, and calculators. The income elasticity of demand for calculators is _____. Income elasticity of demand = Percentage change in quantity demanded÷Percentage change in income

-0.1

Drought cuts the quantity of wheat grown by 2 percent. The price elasticity of demand for wheat is 0.4 Calculate the answers below. Pasta sauce makers estimate that, with the change in the price of pasta that the quantity of pasta sauce demanded will decrease by 4 percent. The pasta sauce makers' estimate of the cross elasticity of demand for pasta sauce with respect to the price of pasta is _____. -4 percent ÷ 8 percent = -0.5

-0.5

When income rises by 2 percent and other things remain the same, the quantity demanded of good C decreases by 3 percent. The income elasticity of demand for good C is _____. Income elasticity of demand is -3 percent divided by 2 percent, which is -1.5.

-1.5

Identify four shift factors of demand with the correct explanation of how each affects demand

-Change in income. As income rises, demand for a normal good increases -Changes in consumer tastes. As the taste for a product rises, demand increases. -Change in taxes paid by consumers. As taxes rise, demand falls. -The price of a related consumer good changes. As the price of a complement falls, demand increases.

Identify four shift factors of supply with the correct explanation of how each affects supply

-Producers expect prices of their products to change in the future. As the price that producers expect to sell their products for increases, supply decreases. -When new production technologies are introduced the cost of production falls and supply increases -Change in taxes paid by producers. As the amount of taxes that producers pay increases, supply decreases. -The price of inputs changes. As the price of inputs rises, supply decreases.

What are some factors that shift the supply curve?

-Technological innovation/changes in price of inputs -Taxes and subsidies -Expectations -Entry or exit of producers -Changes in opportunity costs

Which of the following would most likely decrease the current demand for DVD players?

. an increase in the prices of television sets, a complement for DVD players

if a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price elasticity of demand is..

.33.

if a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about..

.63 and supply is inelastic.

Examine the graph for the wheat market. The price elasticity of demand between point A and point B is _______.

.66

Refer to the diagram. Between the prices of $10 and $8, the price elasticity of demand is

If income were perfectly equally distributed, the Gini coefficient would have a value of?

Why the tepid response to higher gasoline prices? Most studies report that when U.S. gas prices rise by 10 percent, the quantity purchased falls by 1 to 2 percent. In September 2005, the average retail gasoline price was $2.90 a gallon, about $1.00 higher than a year before but purchases of gasoline fell by only 3.5 percent. The studies imply that the price elasticity of demand for gasoline is between a low of _____ and a high of _____.

0.1 and 0.2

When the price of a good increased by 10 percent, the quantity demanded of it decreased 2 percent. The price elasticity of demand is ______. A price rise will ______ total revenue.

0.20; increase

Drought cuts the quantity of wheat grown by 2 percent. The price elasticity of demand for wheat is 0.4 Calculate the answers below. Pasta makers estimate that this change in the price of wheat will increase the price of pasta by 8 percent, and decrease the quantity demanded of pasta by 4 percent. The pasta makers' estimate of the price elasticity of demand for pasta is _____. Price elasticity of demand for pasta = Percentage change in quantity demanded of pasta divided by ÷Percentage change in price of pasta

0.5

Suppose the price of oil increases from $10 a barrel to $30 a barrel. The quantity demanded changes from 40 million barrels a day to 23 million barrels a day. What is the elasticity of demand for oil?

0.54

A baker sells 30 bagels for $2 each. Then, he lowers his price to $1 each and sells 50 bagels. Using the midpoint formula, calculate the baker's price elasticity of demand for bagels.

0.75

A survey found that when incomes increased by 10 percent, the following changes in quantities demanded occurred: computers up by 12 percent, smartphones up by 8 percent, and calculators down by 1 percent. Calculate the income elasticity of demand for computers, smartphones, and calculators. The income elasticity of demand for smartphones is _____. Income elasticity of demand = Percentage change in quantity demanded÷Percentage change in income

0.8

suppose there is a 6 percent increase in the price of a good X and a resulting 6 percent decrease in the quantity of X demanded price elasticity of demand for X is..

Role of Assumption

1. Makes it easier to understand 2. The art in scientific thinking: deciding which assumptions to make

Classify the following topics as relating to microeconomics or macroeconomics. 1. A family's decision about how much income to save. 2. The effect of government regulations on auto emissions. 3. The impact of higher national saving on economic growth. 4. A firm's decision about how many workers to hire. 5. The relationship between the inflation rate and changes in the quantity of money.

1. Microeconomics 2. Microeconomics 3. Macroeconomics 4. Microeconomics 5. Macroeconomics

Classify each of the following statements as positive or normative. 1. Society faces a short-run tradeoff between inflation and unemployment. 2. A reduction in the rate of money growth will reduce the rate of inflation. 3. The Federal Reserve should reduce the rate of money growth. 4. Society ought to require welfare recipients to look for jobs. 5. Lower tax rates encourage more work and more saving.

1. Positive 2. Positive 3. Normative 4. Normative 5. Positive

how do we know when equilibrium is stable?

1. if we ARE at equilibrium we will stay there (unless an external force/shifters pushes us away) 2. if we are NOT there, we are moving towards equilibrium

What can shift demand? (5 determinants of demand)

1. income 2. price of related goods 3. population/number of buyers 4. consumer taste 5. expected prices

what causes a shift in supply? (determinants of supply)

1. input prices 2. technological progress 3. taxes/subsides 4. number of suppliers

If the price of apples increases from $6 to $6.50 per bushel, and the quantity demanded falls from 13,000 bushels to 12,000 bushels, the elasticity of demand is

1.0

A survey found that when incomes increased by 10 percent, the following changes in quantities demanded occurred: computers up by 12 percent, smartphones up by 8 percent, and calculators down by 1 percent. Calculate the income elasticity of demand for computers, smartphones, and calculators. The income elasticity of demand for computers is _____. Income elasticity of demand = Percentage change in quantity demanded÷Percentage change in income

1.2

If the quantity of apples sold at a certain fruit stand increases from 20 lbs per day to 30 lbs per day when the price is lowered from 40 cents per pound to 30 cents per pound, the elasticity of demand is closest to what?

1.4

Tuition and enrolment data Enrolment increased from 15,539,000 in 2000 to 20,618,000 in 2013. The net cost of college (average for all types) increased from $12,357 to $14,860. Calculate the price elasticity of supply of college. Is the supply of college elastic or inelastic? The price elasticity of supply of college is _____. The price elasticity of supply is equal to the percentage change in the quantity supplied divided by the percentage change in the price. The average enrollment is (15,539,000 + 20,618,000)÷2, which is 18,078,500. When enrollment increases from 15,539,000 to 20,618,000, the percentage change in the quantity supplied is [(20,618,000−15,539,000)÷18,078,500]×100, which is 28.1 percent. The average price is ($12,357 + $14,860)÷2, which is $13,608.50. When the price rises from $12,357 to $14,860, the percentage change in price is [($14,860−$12,357)÷$13,608.50]×100, which is 18.4 percent. The price elasticity of supply is 28.1 percent ÷ 18.4 percent, which is 1.53.

1.53

using the midpoint method, the price elasticity of demand for a good is computed to be .75. which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

13.33 percent increase in the price of that good.

If the price elasticity of demand for a good is 1.5, a 10 percent increase in price would result in a

15 percent decrease in quantity demanded.

The cross elasticity of demand between two goods is reported to be +0.2. This implies that:

2 goods are substitues

Suppose that the U.S. government decides to charge wine consumers a tax. Before the tax, 30 billion bottles of wine were sold every year at price of $13 per bottle. After the tax, 12 billion bottles of wine are sold every year; consumers pay $15 per bottle (including the tax) and producers receive $11 per bottle. The burden that falls on consumers is $____per bottle, and the burden that falls on producers is $____ per bottle. A) 1; 3 B) 3; 1 C) 2; 2 D) 4; 0

2, 2

at a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. at a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. using the midpoint method, the price elasticity of supply is about..

2.20

a t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18 each. at a price of $20. the t-shirt maker would be willing to supply 100 t-shirts. using the midpoint method, the price elasticity of supply is about..

2.71 and supply is elastic

The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a:

20 percent reduction in orice

In the United States, as of 2001, the richest 20 percent of the population received about what percent of all income?

22 percent

Assume for a moment that utility is measurable. If a loaf of bread at 20 cents per loaf gives 10 utils, a quart of milk costing 50 cents must give how many utils in consumer equilibrium?

25 utils

The midpoint quantity between 500 units and 200 units is

350.

Drought cuts the quantity of wheat grown by 2 percent. The price elasticity of demand for wheat is 0.4 Calculate the answers below. The price of wheat will rise by _____ percent. Price elasticity of demand = Percentage change in the quantity demanded divided by ÷Percentage change in price.

The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises b

7 percent and quantity supplied rises by 5 percent

The table gives the demand schedule for peanuts. When the price of peanuts falls from $1.20 to $0.80 a packet, what is the change in total revenue? The change in total revenue is _____ dollars. Total revenue equals price multiplied by quantity. When the price is $1.20, the quantity demanded is 60 packets. Total revenue is $1.20×60, which is $72. When the price is $0.80, the quantity demanded is 100 packets. Total revenue is $0.80×100, which is $80.

The elasticity of supply of product X is unitary if the price of X rises by:

8 percent and quantity supplied rises by 8 percent.

1) An increase in consumer incomes will lead to A) a rightward shift of the demand curve for plasma TVs. B) a movement upward along the demand curve for plasma TVs. C) a rightward shift of the supply curve for plasma TVs. D) no change of the demand curve for plasma TVs.

1) Equilibrium is defined as a situation in which A) neither buyers nor sellers want to change their behavior. B) no government regulations exist. C) demand curves are perfectly horizontal. D) suppliers will supply any amount that buyers wish to buy.

10) If a city were to ban the use of automobiles within its city limits, we would expect A) the demand curve for automobiles to shift to the left. B) people to move to another city. C) the demand curve bicycles to shift to the left. D) the demand curve for automobiles to remain the same.

11) If the demand curve is horizontal a rightward shift of the supply curve will lead to A) an increase in quantity supplied. B) an increase in price. C) a decrease in quantity demanded. D) a decrease in price.

12) A drought in the Midwest will raise the price of wheat because of a A) leftward shift in the supply curve. B) rightward shift in the supply curve. C) leftward shift in the demand curve. D) rightward shift in the demand curve.

12) If Qs = -20 + 10p, and Qd = 400 - 20p, what is the equilibrium price? A) 14 B) 42 C) 12.67 D) 38

12) Producer groups tend to lobby for A) price floors. B) price ceilings. C) quantity quotas. D) taxes.

13) If Qs = -20 + 10p, and Qd = 400 - 20p, what is the equilibrium quantity? A) 440 B) 146.6 C) 360 D) 120

14) The market supply curve is found by A) horizontally summing all individual supply curves at a price. B) vertically summing all individual supply curves at a quantity. C) either A or B above since they both give the same answer. D) None of the above.

15) At equilibrium, quantity sold equals the quantity bought. This implies that A) to sell more, producers require more in payment than consumers are willing to pay. B) government regulation is necessary. C) to sell less would require a lower price but would yield greater profit. D) those who don't buy have been treated unfairly.

16) If the price is $5 and the quantity demanded is 100 units, then at a price of $10, the quantity demanded will be A) less than or equal to 100 units. B) greater than or equal to 100 units. C) less than or equal to 1000 units. D) equal to 100 units.

19) Which of the following would NOT change demand? A) the price of the product B) information about the product's health effects C) the income of the consumers D) the price of related products

2) If the price of automobiles were to increase substantially, the demand curve for gasoline would most likely A) shift leftward. B) shift rightward. C) remain unchanged. D) become steeper.

20) If a demand curve shifts left, it implies A) as a group, consumers are willing and able to pay less for the product. B) as a group, consumers are willing and able to pay more for the product. C) government has regulated how many people can purchase the product. D) the profit motive of the firms is making the price too high.

21) An increase in the price of pork will lead to A) a movement up along the demand curve. B) a movement down along the demand curve. C) a rightward shift of the demand curve. D) a leftward shift of the demand curve.

26) If the government institutes a specific tax for a good that has a perfectly inelastic demand curve A) the producer simply passes the entire tax on to the consumer. B) the producer must absorb the entire tax. C) the producer can generally only pass part of the tax onto the consumer. D) the equilibrium price drops.

26) If the price of a pizza were to increase to $50, many people would give up eating pizza while others would continue to eat it. This would indicate A) those who are buying pizza value it at least $50 per pizza. B) those who are not buying pizza value it more than $50 per pizza. C) only those who are extremely wealthy are buying pizza. D) the price of pizza needs to be regulated by the federal government.

3) Costs that pertain to finding a trading partner and making a trade are called A) transaction costs. B) transgression costs. C) consumption costs. D) transaction taxes.

3) If a government-imposed price ceiling causes the observed price in a market to be below the equilibrium price A) there will be excess demand. B) there will be excess supply. C) the curves will shift to make a new equilibrium at the regulated price. D) None of the above.

31) Assume the price of a movie is $10. Jenna demands 2 movies per week, Sam demands 3 movies per week, and Jordan demands 8 movies per week. From this information we can conclude that A) the market quantity demanded at a price of $10 is at least 13 movies per week. B) Jordan is obviously more wealthy than either Sam or Jeanna. C) Sam is irrational compared to Jenna or Jordan. D) the movie industry is unprofitable.

32) To determine the total demand for all consumers, sum the quantity each consumer demands A) at a given price. B) at all prices and then sum this amount across all consumers. C) Both A and B will generate the same total demand. D) None of the above.

5) At equilibrium, quantity sold equals the quantity bought. This implies that A) to sell more, producers require more in payment than consumers are willing to pay. B) government regulation is necessary. C) to sell less would require a lower price but would yield greater profit. D) those who don't buy have been treated unfairly.

5) Consumers have been buying fewer CDs as downloadable music has become easier to purchase and use. We would represent this as A) a leftward shift of the demand curve for CDs. B) a rightward shift of the demand curve for CDs. C) a change in the price of CDs. D) a leftward shift of the supply curve for downloadable music.

5) The supply curve A) represents the quantity supplied at any given price. B) represents the quantity actually sold at any given price. C) is the opposite of the demand curve. D) always intersects the demand curve.

7) If a yet-to-be released video game receives a positive review in a popular gaming magazine, what happens to the demand curve for the video game? A) The demand curve is expected to shift to the right. B) The demand curve is expected to shift to the left. C) The demand curve is not expected to change. D) For those who read the review, demand shifts to the left. For those who don't read the review, demand shifts to the right.

7) Which of the following is NOT a characteristic of perfectly competitive markets? A) The government restricts the number of producers through licensing requirements. B) All market participants are price-takers. C) It is easy to find a trading partner. D) All products are identical.

9) A restriction on the number of people allowed to be medical doctors in the United States would most likely A) increase doctors' fees. B) decrease the demand for doctors. C) decrease the demand for nurses. D) decrease the number of people who get sick.

Which of the following statements is an example of price elasticity of supply?

A 10 percent fall in the price of turkey with no other change decreases quantity supplied by 12 percent.

Suppose a German worker can clean 3 windows or wash 2 shirts in one hour. A Slovakian worker can clean 6 windows or wash 4 shirts in one hour. Which of the following statements is true?

A German worker's opportunity cost of cleaning one window is 2/3 of a shirt.

Suppose a Mexican worker can build 12 wheels or paint 1 frame in an hour. A Canadian worker, on the other hand, can build 8 wheels or paint 2 frames in an hour. Which of the following statements is true?

A Mexican worker has a comparative advantage in wheel production.

Quantity demanded vs demand

A change in quantity demanded results from a change in price and moves along the demand curve. The only factor that influences quantity demanded is price. Depending on the factor, a demand curve can either shift left, leading to a decrease in quantity demanded, or right, leading to an increase in quantity demanded. Common factors that can cause a shift in the demand curve include a consumer's income, age, gender and personal characteristics. A shift in the demand curve may also result from a change in weather, the introduction of competing products, or an external event, among others.

Which of the following would cause a movement along the supply curve for lawn mowers, without shifting the curve?

A change in the price of hired lawn care services

Which of the following would not cause a shift in the market supply for pizza?

A change in the price of pizza

a centrally planned economy.

A command economy is synonymous with:

A computer is a normal good, a smartphone is a normal good, and a calculator is an inferior good.

Assuming that gasoline and tires are complementary goods, the initial effect of an increase in the price of gasoline on the tire market, other things being equal, would best be described as which of the following?

A decrease in the demand for tires

Which of the market outcomes is likely to result from price controls on rental housing?

A decrease in the number of building permits for new rental property

If the steelworkers' union negotiates a new contract with sharply higher wages, what would we expect once a new equilibrium is reached in the steel market?

A decrease in the quantity of steel demanded

CAPITAL

A factory belongs to which category of the factors of production?

If the price of leather rises, other things being equal, which of the following would most likely be the initial effect?

A leftward shift of the shoe supply curve

A line that rises as it moves from left to right has a positive slope.

Which of the following does not distort incentives and is better at promoting economic efficiency? A) a lump-sum tax B) a payroll tax C) a property tax D) an income tax

A lump sum tax

How is elasticity defined?

A measure of the response of one variable to a change in another, stated as a ratio of the percentage change in one variable to the associated percentage change in the other

able to be stated as a verbal argument, numerical table, graph, or mathematical equation.

A model is:

An increase in the price of beef increases the demand for pork. What will the pork market require to restore equilibrium?

A movement up along the supply curve

A positive economic statement must be testable and must be proven correct.

Which of the following events would not cause an outward shift of the demand curve for coffee?

A price war among producers that results in coffee selling for $1 per pound.

What is entrepreneurship?

A process of learning better methods of utilization for the other three factors of production

Which of these sample groups would be most representative of the entire population of the United States?

A sample of 1,000 people called at random from the telephone book

What is efficiency in production?

A situation where it is not possible to produce more of one good without forgoing the opportunity to produce some of another good

Which of the following is an economist's definition of economics?

A social science that examines human behavior in the face of scarcity.

Which of the following is positive, rather than a normative, statement?

A. Law X will reduce national income. B. Law X is a good piece of legislation. C. Congress ought to pass the law X. D. The President should veto law X. Answer: A

Which of the following would make the demand for Coke less elastic? A. Pepsi goes out of business B. A number of new cola makers enter the market C. Coke cuts its prices D. Pepsi cuts its prices

A. Pepsi goes out of business There will be no substitute Substitutes = more elastic

An economic model is

A. a mechanical machine that replicates the functioning of the economy. B. a fully detailed, realistic description of the economy. C. a simplified representation of some aspect of the economy. D. a computer program that predicts the future of the economy. Answer: C

A point inside the production possibilities frontier is

A. efficient, but not feasible. B. feasible, but not efficient. C. both efficient and feasible. D. neither efficient nor feasible.. Answer: B

An economy produces hot dogs and hamburgers. If a discovery of the remarkable health benefits of hot dogs were to change consumers' preferences, it would

A. expand the production possibilities frontier. B. contract the production possibilities frontier. C. move the economy along the production possibilities frontier. D. move the economy inside the production possibilities frontier. Answer: C

The circular-flow diagram illustrates that, in markets for the factors of production,

A. households are seller, and firms are buyers. B. households are buyers, and firms are sellers. C. households and firms are both buyers. D. households and firms are both sellers. Answers: A

All of the following topics fall within the study of microeconomics EXCEPT

A. the impact of cigarette taxes on the smoking behavior of teenagers. B. the role of Microsoft's market power in the pricing of software. C. the effectiveness of antipoverty programs in reducing homelessness. D. the influence of the government budget deficit on economic growth. Answer: D

All economic systems use central planners to decide how much of a good will be produced.

Which of the following would increase the quantity of salmon demanded in eq? A. A big salami sale B. A decrease in the price of mustard (a compliment) C. Development of a new, effect salami making technology

All of the above

In the case of international trade, which of the following does not benefit all nations involved?

All the choices are benefits.

Answer the next question(s) on the basis of the following demand schedule:Refer to the above data. Which of the following is correct?

Although the slope of the demand curve is constant, price elasticity declines as we move from high to low price ranges.

What does it mean to be efficient?

An economy is efficient if production of one good or service must be decreased in order to produce more of another.

What does an opportunity cost of 1.0 indicate?

An equality between a given production choice and the next-best alternative

Suppose bad weather and pollution dramatically reduce the supply of crawfish in Louisiana next year. This would also lead to ________ in the marginal utility of crawfish consumption. A) an increase B) a decrease C) no change D) substitution and income effects

An increase

Which of the following is not a result of minimum wage laws?

An increase in production

What would be most likely to cause the production possibility frontier for education and cars to shift outward?

An increase in the economy's stock of capital

What will cause an increase in the market supply?

An increase in the number of producers, assuming the average quantity supplied per producer remains unchanged

Which of the following would cause a decrease in the market supply for ice cream?

An increase in the price of milk

An online auction house is not a market since the buyers and sellers are geographically dispersed.

Which of the following topics would be classified as part of the field of microeconomics?

Analyzing a firm's use of capital in its production process.

How are economic theories best defined?

As an attempt to understand the choices people make in terms of the context in which they make them

Mary has just stated that normally, as price rises, supply will increase. Her teacher grimaces. Why?

As price rises, quantity supplied will increase

Why is price directly related to quantity supplied?

As price rises, suppliers rearrange their activities to supply more of that good in order to take advantage of the higher price

Which of the following is not a step in analyzing how a change in the market affects the supply and demand for a good?

Assuming that both curves will shift

1) From the 1970s through the 1990s, the relative price of a college education has increased greatly. During the same time period, college enrollment has also increased. This evidence suggests that during this time period A) the demand curve for a college education has shifted leftward. B) the demand curve for a college education has shifted rightward. C) the supply curve for a college education has shifted leftward. D) the supply curve for a college education has shifted rightward.

1) Technological innovation in the production of computers has led to A) a decrease in the quantity demanded for computers. B) a rightward shift of the supply curve for computers. C) a decrease in the quantity supplied of computers. D) None of the above.

10) Which of the following is NOT a characteristic of perfectly competitive markets? A) Transactions costs are a very small part of the sale. B) Information about the product is difficult to find and understand. C) It is easy to find a trading partner. D) All products are identical.

11) Agricultural price supports are A) price ceilings. B) price floors. C) quantity quotas. D) taxes.

11) If the supply curve of a product changes so that sellers are now willing to sell 2 additional units at any given price, the supply curve will A) shift leftward by 2 units. B) shift rightward by 2 units. C) shift vertically up by 2 units. D) shift vertically down by 2 units.

11) The CB radio was very popular in the 1970s and 1980s for communicating while driving, and people bought them because other drivers had them too and they could therefore talk with many others on their trips. This illustrates A) that the demand curve for CB radios was inelastic. B) the network effect. C) that CB radios and gasoline are complementary goods. D) the effects of mobile phones on the demand curve for CB radios.

13) When there is a binding price floor A) there is no equilibrium. B) the quantity demanded does not equal the quantity supplied. C) all potential producers are happy because they can sell the good at a higher price. D) the government is helping consumers at the expense of producers.

14) Assume Joe is only willing to pay $5 for a Ferrari sports car. A) Joe is not considered part of the demand for Ferraris. B) Joe won't be sold a Ferrari. C) Joe is not considered rational. D) Joe's willingness to pay is not indicative of how much he values the Ferrari.

15) A downward sloping demand curve indicates that A) individuals all have the same valuation of the same product. B) individuals have different valuations of the same product. C) individuals have no valuations of a particular product. D) certain individuals are uninformed about certain aspects of the product.

15) A price floor that is set above the equilibrium price A) causes suppliers to lower their prices. B) is binding. C) is non-binding. D) creates a shortage.

2) Government prohibition of advertising cigarettes on television would most likely result in A) a rightward shift in the demand curve for cigarettes. B) a leftward shift in the demand curve for cigarettes. C) a rightward shift in the demand curve for television advertising time. D) no change in the market for either cigarette or television advertising.

22) Holding all other factors constant, consumers demand more of a good the A) higher its price. B) lower its price. C) steeper the downward slope of the demand curve. D) steeper the upward slope of the demand curve.

23) If the government places a $1.20 tax on each pizza sold A) consumers will have to pay $1.20 more for each pizza they buy. B) the supply curve will shift left by $1.20. C) the demand curve will shift left by $1.20. D) both the demand curve and the supply curve will shift by 60 cents each.

27) If the government institutes a specific tax for a good that has a perfectly elastic demand curve A) the producer simply passes the entire tax on to the consumer. B) the producer must absorb the entire tax. C) the producer can generally only pass part of the tax onto the consumer. D) the equilibrium price drops.

28) A change in a relevant factor other than the price of the good itself causes a ________ the demand curve, and a change in a good's own price causes a ________ the demand curve. A) shift of, shift of B) shift of, movement along C) movement along, shift of D) movement along, movement along

3) If the price of automobiles were to decrease substantially, the demand curve for public transportation would most likely A) shift rightward. B) shift leftward. C) remain unchanged. D) remain unchanged while quantity demanded would change.

3) The price of crude oil rose to over $100 per barrel in early 2013. What would we expect to see happen to the supply of plastic, which is produced using crude oil? A) The supply of plastic will increase. B) The supply of plastic will decrease. C) The supply of plastic will stay the same because the government requires plastic producers to meet statutory minimum production levels. D) The supply of plastic will stay the same because of the profit motives of plastic producers.

4) A market is said to "clear" when A) sellers give up selling their goods because they can't find any buyers. B) buyers and sellers are able to buy and sell as much as they want at the market price. C) the government decides to shut it down. D) sellers run out of goods to sell.

5) A price ceiling that is set below the equilibrium price A) causes suppliers to raise their prices. B) is binding. C) is non-binding. D) creates a surplus.

6) A price ceiling that is set below the equilibrium price A) causes suppliers to lose money. B) creates a shortage. C) is non-binding. D) creates a surplus.

6) Suppose the demand curve for a good shifts rightward, causing the equilibrium price to increase. This increase in the price of the good results in A) a rightward shift of the supply curve. B) an increase in quantity supplied. C) a leftward shift of the supply curve. D) a downward movement along the supply curve.

7) Consumer groups tend to lobby for A) price floors. B) price ceilings. C) quantity quotas. D) taxes.

7) Suppose a market were currently at equilibrium. A rightward shift of the supply curve would cause a(n) A) increase in price but a decrease in quantity. B) decrease in price but an increase in quantity. C) increase in both price and quantity. D) decrease in both price and quantity.

8) When there is a binding price ceiling A) there is no equilibrium. B) the quantity demanded does not equal the quantity supplied. C) all potential customers are happy because they can buy the good at a lower price. D) producers move production to another country.

8) Which of the following cultural events likely increased the demand for the product highlighted in the event? A) the banning of cigarette advertising on television B) the inclusion of Reese's Pieces in the movie E.T. C) increased environmental awareness about the impacts of sport utility vehicles (SUVs) D) concerns over "Mad Cow" disease in beef

9) Which of the following is NOT a characteristic of perfectly competitive markets? A) Transactions costs are a very small part of the sale. B) There are three suppliers that form an oligopoly. C) It is easy to find a trading partner. D) All products are identical.

Which of the following would increase the demand for salami? A. A big salami sale B. A decrease in the price of mustard (a compliment) C. Development of a new, effective salami making technology

B. A decrease in the price of mustard (a compliment)

Which of the following would decrease the price of peanut butter? A. Income rises and PB is a normal good B. Price of jelly (a compliment) rises C. Price of peanuts rises D. The price of bread (a compliment) falls

B. Price of jelly (a compliment) rises

Suppose the price of chocolate decreases. As a result new would expect to see A. increase in d for vanilla (a substitute) B. increase in d for donuts (a compliment) C. increase in d for chocolate

B. increase in d for donuts (a compliment) because now more people will be buying chocolate, and they want to buy donuts to go with it

Why is price inversely related to quantity demanded?

Because as price rises, consumers substitute other goods whose price has not risen

In a market for a product, why is the price of the product higher at higher output levels?

Because producers' opportunity costs are higher at higher output levels

Which worker has both an absolute and a comparative advantage in one of the tasks?

Both Carol and Than.

In July 2003, Ed Schwartz ate six ice cream cones at a price of 50 cents per cone. In July 2004, he ate seven ice cream cones at a price of 60 cents per cone. What is the most likely explanation of his behavior?

Both income and the prices of other goods went up from 2003 to 2004 by more, proportionately, than the price of ice cream rose

An increase in the income of a consumer will cause his / her demand for a normal good to increase. How will an increase in income affect the equilibrium price and quantity?

Both quantity and price increase.

Suppose that 320,000 jars of kosher pickles were sold in New York City, earning a total revenue of $313,600. In July 1980, 320,000 jars were sold again, for a total revenue of $380,800. What is the most likely explanation?

Both the supply and the demand curve for pickles shifted upward

Which of the following is an advantage of pure capitalism?

Buyers and sellers interact to exchange goods

Which method accurately describes how opportunity cost is calculated?

By dividing the best alternative by the production choice made

11) Which of the following is NOT a characteristic of perfectly competitive markets? A) Buying the product requires you to hire a lawyer to write a contract. B) All market participants are price-takers. C) You are the only buyer of the product. D) All products are identical.

12) The quantity demanded for a good A) must equal the quantity actually sold. B) can be less than the quantity actually sold. C) can be greater than the quantity actually sold. D) is always greater than the quantity actually sold.

13) An individual who is only willing to pay a relatively low amount for a particular good A) would fall in the upper portion of the demand curve. B) would fall in the middle portion of the demand curve. C) would fall in the lower portion of the demand curve. D) would not be considered part of the demand curve.

13) Suppose there are 100 identical firms in the rag industry, and each firm is willing to supply 10 rags at any price. The market supply curve will be a A) vertical line where Q = 10. B) vertical line where Q = 100. C) vertical line where Q = 1000. D) horizontal line where Q = 1000.

13) The owner of a railroad that carries cargo should ________ supply when she foresees regulations that will ________ the cost of shipping cargo by truck. A) decrease, increase B) decrease, leave unchanged C) increase, increase D) leave unchanged, increase

14) A price floor that is set below the equilibrium price A) causes suppliers to lower their prices. B) is binding. C) is non-binding. D) creates a shortage.

14) After tickets for a major sporting event are purchased at the official box office price, a market often develops whereby these tickets sell at prices well above the official box office price. Which of the following scenarios would NOT be able to explain this result? A) The official price was below equilibrium from the moment the tickets were available. B) Increased publicity causes the demand curve for the event to shift rightward. C) The event was not a sellout. D) Not everyone who wanted a ticket was able to buy one at the box office.

16) According to Adam Smith's invisible hand A) markets need the government to intervene. B) forces are constantly pushing markets out of equilibrium C) people coordinate their activities, resulting in equilibrium in the market. D) there is an invisible glove that restricts what markets can do.

17) According to the Law of Demand, the demand curve for a good will A) shift leftward when the price of the good increases. B) shift rightward when the price of the good increases. C) slope downward. D) slope upward.

18) If price is initially above the equilibrium level A) the supply curve will shift rightward. B) the supply curve will shift leftward. C) excess supply exists. D) all firms can sell as much as they want.

18) The law of demand A) was passed by the 102nd U.S. Congress. B) is a natural law, much like the law of gravity. C) is considered a "law" in economics because of the overwhelming empirical evidence that supports its logic. D) is considered a "law" in economics in order to force economic models to operate fully.

2) Consumers and firms are known as price takers only if A) no market exists to determine the equilibrium price. B) they can set the market price. C) they cannot unilaterally affect the market price. D) excess demand exists.

2) Suppose a market were currently at equilibrium. A rightward shift of the demand curve would cause A) an increase in price but a decrease in quantity. B) a decrease in price but an increase in quantity. C) an increase in both price and quantity. D) a decrease in both price and quantity.

2) The supply curve is influenced by A) the income of consumers. B) the number of customers in the market. C) the prices of the inputs required to produce the product. D) whether the economy is free-market or command.

20) In some markets, ________ act to adjust the price to bring the market into equilibrium. A) bulls B) regulators C) market makers D) web sites

24) A increase in quantity demanded as a result of a change in price A) is a rightward shift of the demand curve. B) is a leftward shift of the demand curve. C) leaves the demand curve unchanged. D) is not possible.

25) If the government institutes a specific tax for a good A) the producer simply passes the entire tax on to the consumer. B) the producer must absorb the entire tax. C) the producer can generally only pass part of the tax onto the consumer. D) the equilibrium price drops.

25) If the price of automobiles were to increase substantially, the demand curve for automobiles would most likely A) shift rightward. B) shift leftward. C) remain unchanged. D) become steeper.

4) A price ceiling that is set above the equilibrium price A) causes suppliers to raise their prices. B) is binding. C) is non-binding. D) creates a shortage.

4) If the price of automobiles were to decrease substantially, the demand curve for pizza would most likely A) shift rightward. B) shift leftward. C) remain unchanged. D) remain unchanged while quantity demanded would change.

4) It is appropriate to use the supply-and-demand model in which of the following markets? A) beer market B) car market C) wheat market D) market for breakfast cereal

5) It is appropriate to use the supply-and-demand model in which of the following markets? A) beer market B) wine market C) real estate market D) market for gourmet pizza

6) As people have become more health-conscious and decided to eat food that is better for them A) the demand curve for scooters has shifted to the right. B) the demand curve for cupcakes has shifted to the right. C) the demand curve for oranges and apples has shifted to the right. D) None of the above.

6) Which of the following is NOT a characteristic of perfectly competitive markets? A) There is free entry and exit. B) All market participants are price-takers. C) It is hard to find a trading partner. D) All products are identical.

7) An increase in the price of oil will A) shift the supply curve of oil to the left. B) shift the supply curve of oil to the right. C) leave the supply curve of oil unchanged. D) Not enough information to answer the question.

8) The expression "increase in quantity supplied" is illustrated graphically as a A) leftward shift in the supply curve. B) rightward shift in the supply curve. C) movement up along the supply curve. D) movement down along the supply curve.

Which type of factor is a tractor?

Capital

What are the three classical factors of production?

Capital, labor, and natural resources

Which worker has a comparative advantage in retrieving books?

Carol

Which worker has an absolute advantage in retrieving books?

Carol

Which of the following goods are considered scarce in the U.S. economy?

Cars and gasoline products

Which of the following items go together?

Change in quantity demanded and movement along a demand curve

transitional economies.

China and Russia are:

Markets are an example of coordination of?

Choices through spontaneous order

When comparing coffee and Colombian-grown coffee, which would have more elastic demand?

Colombian-grown coffee

________ is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.

Comparative advantage

The statement: "if the price of bagels rise, and if at the same time all other food stuff prices remain constant, purchase of cream cheese is likely to increase," is an example of what?

Conditional forecast

What does a Demand Curve show?

Consumer Behavior

Which of the following statements is true?

Consumer surplus measures the net benefit from participating in a market.

In a free market, what will happen to a surplus over time?

Consumers are not willing to pay the high price. firm want to sell their mounting inventories. the firm must lower their price to sell their goods

Given the demand and supply conditions shown in Figure 4-2, if the government imposes a price ceiling of a, indicate the quantity consumers would like to buy and the amount producers would be willing to supply.

Consumers would want to buy t; producers would be willing to sell r.

Which of the following would be an example of "spontaneous order"?

Coordinating the number of houses available in Leesburg, Virginia, with the number of people wanting to live in that city

1) Government actions can cause a A) shift in the supply curve. B) shift in the demand curve. C) reaction from firms in other countries. D) All of the above.

1) It is appropriate to use the supply-and demand-model if, in a market A) everyone is a price taker with full information about the price and quality of the good. B) firms sell identical products. C) costs of trading are low. D) All of the above.

10) If the demand curve is vertical a rightward shift of the supply curve will lead to A) an increase in quantity supplied. B) an increase in quantity demanded. C) a decrease in quantity demanded. D) a decrease in price.

10) In the labor market, if the government imposes a minimum wage that is below the equilibrium wage, then A) workers who wish to work at the minimum wage will have a difficult time finding jobs. B) firms will hire fewer workers than without the minimum wage law. C) some workers may lose their jobs as a result. D) nothing will happen to the wage rate or employment.

10) Supply curves A) slope upward. B) slope downward. C) are horizontal. D) can have many shapes.

16) A price floor that is set above the equilibrium price A) causes suppliers to lose money. B) creates a shortage. C) is non-binding. D) creates a surplus.

17) A competitive equilibrium is described by A) a price only. B) a quantity only. C) the excess supply minus the excess demand. D) a price and a quantity.

19) If the price of a good is initially below the equilibrium level A) the supply curve will shift leftward. B) the supply curve will shift rightward. C) firms supply none of the good. D) excess demand exists.

2) Once an equilibrium is achieved, it can persist indefinitely because A) shocks that shift the demand curve or the supply curve cannot occur. B) shocks to the demand curve are always exactly offset by shocks to the supply curve. C) the government never intervenes in markets at equilibrium. D) in the absence of supply/demand shocks no one applies pressure to change the price.

22) A specific tax on sellers will A) shift the demand curve to the right. B) shift the demand curve to the left. C) shift the supply curve to the right. D) shift the supply curve to the left.

23) As the price of a good increases, the change in the quantity demanded can be shown by A) shifting the demand curve leftward. B) shifting the demand curve rightward. C) moving down along the same demand curve. D) moving up along the same demand curve.

24) If the government places a $1500 tax on each hybrid car sold A) consumers will stop buying hybrid cars. B) the supply curve will shift left by up to $1500, depending on the price elasticity of demand. C) the supply curve will shift to the right by $1500. D) None of the above.

27) Which of the following is NOT possible according to the law of demand? A) A horizontal demand curve B) A vertical demand curve C) A downward-sloping supply curve D) An upward-sloping demand curve

3) A market equilibrium occurs A) only with government regulation. B) only because of the profit motive of firms. C) only because of the complacency of consumers. D) through the interaction of self-interested consumers and producers.

3) A rightward shift of the demand curve will lead to a(n) A) increase in equilibrium price. B) excess demand at the old equilibrium price. C) increase in quantity supplied. D) All of the above.

4) A leftward shift of the demand curve will lead to a(n) A) decrease in equilibrium price. B) excess supply at the old equilibrium price. C) decreased in quantity supplied. D) All of the above.

4) Government regulations A) have no impact on supply. B) only change the quantity supplied, not the supply curve. C) are generally ineffective due to lobbying by suppliers. D) can change both quantity supplied as well as the supply curve.

5) When an imported good has restrictions are placed on it that limits the amount that can be imported and as a result the price of the good increases, the demand curve for that good will A) shift rightward. B) shift leftward. C) become steeper. D) be unaffected.

6) If pizza and tacos are substitutes, a decrease in the price of tacos would lead to a A) decrease in the demand curve for pizza. B) decrease in the quantity demanded of pizza. C) decrease in the price of pizza. D) All of the above.

8) A rightward shift of the supply curve will lead to a(n) A) decrease in equilibrium price. B) excess supply at the old equilibrium price. C) increase in quantity demanded. D) All of the above.

8) Which of the following is NOT a characteristic of perfectly competitive markets? A) Transactions costs are a very small part of the sale. B) All market participants are price-takers. C) It is easy to find a trading partner. D) Products are differentiated.

9) A leftward shift of the supply curve will lead to a(n) A) increase in equilibrium price. B) excess demand at the old equilibrium price. C) decrease in quantity demanded. D) All of the above.

9) Recently, many cities have attempted to pass laws taxing the sale of sugary drinks such as soda pop. If one of these laws passes, we would expect A) the supply curve for soda pop to shift to the right. B) the supply curve for soda pop to become more vertical. C) the demand curve for soda pop to shift to the right. D) the demand curve for soda pop to shift to the left.

9) The Law of Supply states A) that supply curves slope upward. B) that supply curves can be vertical or horizontal. C) Both A and B D) None of the above.

What kind of data are bar charts and pie charts good at displaying?

Data in non-numerical categories

Anything that decreases the enjoyment consumers receive from consuming a good will...

Decrease demand

Marge has spent her entire budget on milk and cookies. The last glass of milk provided Marge with 10 additional utils and the last cookie provided her with 30 additional utils. The price of a cookie is twice the price of a glass of milk. Given this information, Marge should: A) increase her consumption of milk and decrease her consumption of cookies. B) decrease her consumption of milk and increase her consumption of cookies. C) increase her consumption of milk and increase her consumption of cookies. D) decrease her consumption of milk and decrease her consumption of cookies.

Decrease her consumption of milk and increase her consumption of cookies

A change in safety regulation that decreases the demand and increases the supply of airline flights will

Decrease ticket prices

During the Great Depression, demand for goods and services of every type dropped. Also during this period, the prices paid for farmers' products dropped by much more of a percentage, than the prices farmers paid for manufactured goods. What is a possible explanation of this pattern?

Demand for farm goods tends to be less price elastic than demand for manufactured goods

What can be concluded if, other things being equal, the number of movie tickets sold increases by 10 percent when the price is cut by 20 percent?

Demand is price inelastic

If the supply of snowboards increases, what would we expect to happen in the market for skis (a substitute)?

Demand to decrease

What can be concluded if the deregulation of airline fares, other things being equal leads to lower prices and higher revenues?

Demand was elastic

A medical report implying that tea is bad for your health is published

Demand will decrease, causing a fall in price and a fall in quantity

Consumers' income falls (assume tea is a normal good)

Demand will decrease, causing a fall in price and a fall in quantity

Which of these questions can be evaluated using the scientific method?

Do school lunches meet nutrition guidelines?

Which of the following is likely to have the most elastic demand?

Dole brand bananas

Suppose Doward can peel 15 potatoes in an hour, or he can slice 20 onions in an hour. Shashawna can peel 30 potatoes in an hour, or she can slice 25 onions. Which of the following statements is true?

Doward's opportunity cost of peeling one potato is 6/5 of an onion.

Which of the following policies is closest in concept to a negative income tax?

EITC

Which of the following statements is true?

Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off.

The statistical analysis of empirical economic data is called?

Econometrics

How will economic growth affect the production possibility frontier?

Economic growth will stretch the curve to include points on the right (outer) side of the curve

________ is maximized in a competitive market when marginal benefit equals marginal cost.

Economic surplus

How do you refer to scarcity and the way people choose to deal with it?

Economics

In a free market, what will happen to a shortage over time?

Either consumers will bid up prices, or the firm will recognize that it charge higher prices and still sell all of its goods

Entrepreneurs are willing to accept risks for an opportunity to earn a salary by producing a new, innovative product or approach to business.

Which factor of production involves human resources performing the function of raising capital, organizing, managing, and assembling other factors of production, and making basic business policy decisions?

Entrepreneurship

In the pencil market, the cost of producing graphite falls at the same time as the number of students taking tests in pencil decreases. What happens to eq p and q?

Eq p decreases but effect on eq q is uncertain

True or False. All economic systems use central planners to decide how much of a good will be produced.

False

True or False: According to early economist David Ricardo, if countries follow the law of absolute advantage, trade and specialization will be mutually beneficial.

False

True or False: An online auction house is not a market since the buyers and sellers are geographically dispersed

False

True or False: Entrepreneurs are willing to accept risks for an opportunity to earn a salary by producing a new, innovative product or approach to business.

False

True or False: If one country has a lower opportunity cost of producing corn than other countries do, that country has an absolute advantage in producing corn

False

True or False: If the country called Superproducia can produce goods and services using fewer resources than any other country in the world, Superproducia should produce everything for itself and not trade.

False

True or False: Specialization and international trade based on comparative advantages benefits everyone.

False

Suppose an average Chinese worker can build an engine in two hours and assemble five computers in the same amount of time. Also assume an average Japanese worker can build an engine in one hour. For Japanese workers to have a comparative advantage in building engines, how many computers must they be able to assemble in two hours?

Fewer than ten

If the price elasticity of demand for a good is 1.8 and the price increases by 30%, how much will quantity demanded change?

Fifty-four percent

Assume the price elasticity of demand for a product is 0.6. When the price is $15, consumers buy 50 units of the good. If the price decreases by twenty percent, how many units will consumers buy?

Fifty-six units

buyers and sellers to exchange goods in a free market, with price indicating value.

Free enterprise allows:

Robinson can pick 50 pieces of fruit or catch 20 fish in a day. Friday can pick 40 pieces of fruit or catch 10 fish in a day. Which of the following is a likely trade?

Friday gives Robinson three pieces of fruit in exchange for one fish.

Refer to the diagram. In this competitive market, combined consumer and producer surplus is maximized at:

Joe makes $5,000 a month and he wants to buy a car that would cost him $1000 a month. The dealer raises the price so it will cost him $3000 a month. Do you think Joe will buy this car?

He wouldn't buy the car because his demand for the car is elastic.

Every economy must face three basic questions. Which of the following is not one of these questions?

How long will it take to produce the good or service?

Which of the following is correct?

If demand is elastic, a decrease in price will increase total revenue.

The more time consumers have to adjust to a change in price:

If the demand for farm products is price inelastic, a good harvest will cause farm revenues to:

Which of the following does the law of demand specifically imply?

If the product price increases, quantity demanded will decrease

Suppose Eastland College does not have a summer program but could rent out the campus to various summer sports camps for $100,000. Consider the possibility of having a summer program by Eastland College itself. The potential revenue of the summer camps represents a(n): A) implicit cost of capital. B) explicit cost. C) total cost. D) sunk cost.

Implicit cost of capital

Which of the following will cause an outward shift of the market supply curve?

Improvements in technology

It has just been reported that eating red meat is bad for your health

In the market for steak, equilibrium price will fall and equilibrium quantity will fall

What does the term investment, as it is used in economics, mean?

Increasing the economy's stock of capital

If a good accounts for a large part of a consumer's budget, what would the demand for a complement to that good be considered?

Inelastic

American agricultural markets are characterized by large price changes and large total revenue changes. Which of the following best accounts for this phenomenon?

Inelastic demand for most agricultural products and large changes in supply

If price falls, what happens to the demand for a product?

It does not change.

Economists have shown that the burden of a tax is the same whether the tax is collected from the buyer or the seller. Why, then, are gasoline and cigarette taxes imposed on sellers?

It is more difficult for buyers to keep track of their purchases, and for the government to verify that the right of amount of tax revenue is collected.

Economists have shown that the burden of a tax is the same whether the tax is collected from the buyer or the seller. Why, then, are gasoline and cigarette taxes imposed on sellers?

It is more difficult for buyers to keep track of their purchases, and for the government to verify that the right of amount of tax revenue is collected

What is shortage?

It is when the quantity demanded is greater than the quantity supplied. This occurs when price is below p* Remember: shortage is NOT scarcity

A baker sells 30 wedding cakes for $200 each. Suppose the cakes are price elastic and the baker decides to lower her price. What will happen to her total revenue?

It will increase.

For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France can produce 1 bottle of wine for every 25 pounds of cheese it produces. Which of the following is true about the comparative advantage between the two countries?

Italy has the comparative advantage in wine.

Jan can either pick 10 bushels of apples or press 20 gallons of cider in one day. Kim can either pick 15 bushels or press 15 gallons in a day. which of the following statements is true?

Jan has absolute and comparative advantages in pressing cider

Which of the following would cause a decrease in supply?

Lower labor productivity

Suppose you sell jewelry boxes and a business consultant determines that demand for your product is elastic. If you want to increase your total revenue, you should therefore

Lower the price of your boxes because since demand is elastic, if you raise your price, people will stop buying them

Let MUa represent the marginal utility of good a, MUb the marginal utility of good b, Pa, the price of good a, and Pb the price of good b. In consumer equilibrium, which of the following must hold?

MUa/MUb = Pa/Pb

Policies to control unemployment are primarily a concern of?

Macroeconomics

Which of the economic systems answers the basic economic questions as follows: Q: What will be produced? A: Whatever the buyers want. Q: How will it be produced? A: Using the least-cost production technique. Q: For whom will it be produced? A: Based on consumers' ability to pay

Market

Assume that all employees in an industry receive a raise based on a new labor contract. How will this raise affect the product market for the product these employees manufacture?

Market supply will decrease.

The study of the factors determining the price of gasoline relative to the price of other fuels would primarily be a concern of?

Microeconomics

Which worker has an opportunity cost of 1.0 for both reshelving and retrieving books?

Miguel

When comparing European-made cars and German-made cars, what would be the demand for European-made cars?

More inelastic

Graphically, what impact would an increase in the price of jet fuel have on the market for air travel?

NOT! It would shift the demand curve for air travel to the left.

Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should happen to the equilibrium price and quantity for shoelaces as a result?

NOT! Price will increase and quantity decrease

How will a reduction in the price of cotton influence the market for blue jeans?

NOT! The cost of producing blue jeans will fall, and the supply curve for blue jeans will shift to the left.

An important assumption that is made when constructing a supply schedule is

NOT! only price and quantity matter in determining supply.

When there is excess demand for a product in a market

NOT! price must be above the equilibrium price.

A new hormone will increase the amount of milk each cow produces. If this hormone is adopted by many dairies, what will be the effect on the milk market?

NOT! An increase in supply, higher equilibrium price, and higher equilibrium quantity.

If we observe an increase in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by

NOT! a decrease in the demand for the good.

Which of the following will decrease the demand for coffee?

NOT! a decrease in the prices of coffee makers and coffee cups, complements to coffee

Other things being equal, the effect of an increase in the price of orange juice would be illustrated by

NOT! a downward movement along the demand curve for orange juice.

In a typical college town, when students go home for the summer, the demand for many items such as pizza and textbooks

NOT! increases, which is a shift to the right of the demand curves for these goods

Refer to Exhibit 3-10. 300 units of X will be exchanged in this market if the price is

NOT! quantity demanded is less than quantity supplied

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling,

NOT! the demand curve for physicals shifts to the right.

Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that the below-equilibrium prices established by rent controls would

NOT!! promote a rapid increase in the future supply of housing.

Alfred Marshall founder of what type of economics?

Neoclassical economics

Oil prices rise ahead of OPEC meeting The Organization of the Petroleum Exporting Countries (OPEC) produces about 40 percent of the world's output of crude oil. With the global demand for oil falling, OPEC has cut production in an attempt to stop the price sliding further from its high of $147 a barrel. OPEC knows that to raise the world price of oil it has to cut the total production of its member countries. OPEC also knows that the demand for crude oil is inelastic. Is it possible to conclude from these facts that OPEC's total revenue would increase if it were to cut its production?

No because non-OPEC oil producers can increase production, which lowers the price.

are demand curves static/not moving?

No. we do not always consume at the same point on the demand curve and the demand curve isn't always stationary

Normative statements are based on opinion and cannot be proven by facts.

The following equations represent the demand and supply for bottles of nail polish. QD = 25 - P QS = -15 + 3P What is the equilibrium price (P) and quantity (Q - in thousands) of bottles of nail polish?

P = $10; Q = 15 thousand

Let A stand for accounting profit, P for pure economic profit, E for explicit costs, and I for implicit costs then?

P = A-I

Coordinate axes refer to the specified plane in which points representing?

Pairs that are graphed

Taxation according to the ability-to-pay principle is best illustrated in the United States by: A) sales taxes. B) personal income taxes. C) excise taxes. D) gasoline taxes.

Personal income taxes

If cheese is a main ingredient of pizza, what happens to the price of pizza when the price of cheese increases?

Pizza prices rise.

During a visit to Moscow, you notice long lines outside every butcher shop. What is the most reasonable conclusion from this observation?

Price of meat is held below equilibrium price

Assume that in a competitive market, price is initially below the equilibrium level. What economic predictions can we make?

Price will increase, quantity demanded will decrease, and quantity supplied will increase.

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

Price would decrease, and quantity would decrease

If the demand for a good increased, what would be the effect on the equilibrium price and quantity?

Price would increase, and quantity would increase.

What does a Supply Curve show?

Producer Behavior

If the government imposes an excise tax in a market in which the supply curve is perfectly inelastic, the burden of the tax will fall completely on the ________ and the deadweight loss will equal ________. A) consumers; zero B) producers; zero C) consumers; the government's tax revenue D) producers; the government's tax revenue

Producers; zero

According to the substitution effect, a decrease in the price of a product leads to an increase in the quantity of the product demanded because buyers: A) have more real income. B) purchase fewer substitute goods. C) purchase more of the now relatively less expensive good. D) purchase more complementary goods.

Purchase more of the now relatively less expensive good

Using QS to indicate quantity supplied and QD to indicate quantity demanded, which of the following circumstances would be most likely to produce an upward movement of the price of a good?

QS = 100, QD = 200

What is one assumption made by the production possibility frontier?

Quantities of available factors of production and technology are fixed

A price ceiling set below an equilibrium price tends to cause persistent imbalances in the market because

Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage

State the law of demand

Quantity demanded rises as price falls, other things constant. Quantity demanded falls as price rises, other things constant

Suppose a price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia. What will be the likely effect on the market for sparkling wine in Vinyardia?

Quantity demanded will decrease, quantity supplied will increase, and a surplus will result.

A price floor set above an equilibrium price tends to cause persistent imbalances in the market because

Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.

State the law of supply

Quantity supplied rises as price increases, other things constant. Quantity supplied falls as price decreases, other things constant.

What are some examples of Inferior Goods?

Ramen

Which of the following is an example of a command economy element within the U.S. economy?

Rent controls on apartments

At a price of $5, Sam buys 10 units of a product; when the price increases to $6, Sam buys 8 units. Which of the following is correct about Sam's behavior?

Sam's quantity demanded has decreased, and his demand has not changed

What is true about scarcity?

Scarcity is a matter of the relationship between resources and human wants

Which of the following is true?

Something is scarce if the quantity people want exceeds the resources available to make that amount.

In economics concepts, what is the opposite of hierarchy?

Spontaneous order

Bad weather wreaks havoc with the tea crop

Supply will decrease, causing a rise in price and a fall in quantity

A technological innovation lowers the cost of producing tea

Supply will increase causing a fall in price and a rise in quantity

OPEC announces it will increase oil production by 20 percent. What is the effect of this action on the price of oil now?

Supply will increase, causing the price of oil to fall.

Which worker has a comparative advantage in reshelving books?

Than

Which worker has an absolute advantage in reshelving books?

Than

What is one underlying assumption of economics?

That we cannot use resources to fulfill two wants at the same time

Which phrase correctly defines absolute advantage?

The ability to do a task using fewer resources than anyone else

Which phrase correctly defines comparative advantage?

The ability to do a task while giving up less alternative production than anyone else

the lack of incentive for individuals.

The biggest disadvantage in a command economy is:

In the US, say gasoline costs consumers about $2.50 a gallon. In Italy, say it costs consumers about $6 a gallon. What effect does this price differential likely have on the size of cars in the US compared to Italy?

The cars in Italy are most likely much smaller than in the US.

A person notices that a cat is getting fatter and fatter and concludes that the cat is eating too much. Which statement shows why this could be the mistake of ignoring secondary effects and unaccounted variables?

The cat is pregnant

households earn money by selling their factors of production to firms in the factor market and use that money to buy goods and services from firms in the product market.

The circular flow of economic activity can be summed up as:

Robinson can pick 50 pieces of fruit or catch 20 fish in a day. Friday can pick 40 pieces of fruit or catch 10 fish in a day. Which of the following statements is not true?

The cost of Robinson catching a fish is 2/5 of a piece of fruit.

What happens to the demand curve for hot dogs when the price of hot dog buns decreases?

The demand curve for hot dogs will shift outward.

Peanut butter and jelly are used together to make sandwiches. If the price of peanut butter increases, what changes will occur in the market for jelly?

The demand curve for jelly shifts inward.

An increase in the price of Fords will have what likely effect in the market for Chevrolets?

The demand for Chevrolets will increase.

What does the slant of a line on a graph reflect?

The direction of the relationship between the two variables

An economist is looking at how inflation affects unemployment, ceteris paribus. Which statement explains why this is a problem?

The economist is ignoring that other variables are unlikely to remain constant

Which of the following would be the focus of a macroeconomic study?

The economy as a whole

The production possibilities frontier model assumes which of the following?

The economy produces only two products.

The phrase "movement along the curve" refers to which of the following?

The effect of a change in a variable that appears on one of the coordinate axes of the diagram

Suppose Clemson just won the natty and the nation is going crazy and a new technology has lowered the cost of producing orange dye. What would be the effect on the market for orange t shirts?

The eq q would rise but the effect on eq p is uncertain

A $5 per ticket tax is imposed on airline tickets to help pay for improvements in the nation's air traffic control system. What is most likely to happen to the equilibrium price?

The equilibrium price will rise by less than $5

What is the expected impact of increased security measures imposed by the federal government on airlines and consumers? What do you predict will happen to airline fares and volume of travel?

The impact of increased security measures on airline fares is uncertain. The impact of increased security measures on the volume of travel will lead to a decrease in quantity.

Explain what a sudden popularity of "Economics Professor" brand casual wear would likely do to prices of that brand

The increase in demand would lead to excess demand, which will lead to higher prices. The net result is a higher equilibrium price and quantity.

Which of the following is not a resource (factor of production)?

The invisible hand

In a free market, what processes would eliminate the excess demand in a rental housing market?

The market bidding mechanism

Which of the following is an example of a variable?

The monthly income of a household

Which of the following is not a determinant of an individual's demand for a good?

The number of buyers

Given the factors of production and the technology available to Joe's restaurant, a point representing 500 roast turkey dinners and 600 steak dinners lies outside the production possibility frontier. What does this mean?

The point cannot possibly be produced

In most developing countries, there are long lines of taxis at airports, and these taxis often wait two or three hours for a customer. What does this tell you about the price in that market?

The price must be greater than the equilibrium price, causing excess supply

what is the law of supply?

The price of a product of a product or service and the quantity supplied are directly related. Supply schedule shows the relationship between price and quantity supplied for a specified time period (other things being equal)

In a flood, usable water supplies ironically tend to decline because the pumps and water lines are damaged. What will a flood likely do to prices of bottled water?

The price of bottled water will increase because bottled water is a substitute of water from pumps and water lines. Demand for bottled water would increase enormously, which leads to upward pressure on prices.

Capitalist economies depend on which of the following to allocate resources and finished goods and services?

The price system

Which of the following is not true about markets?

The product market is also called the resource market.

Assuming the retailer pays the sales tax, why does sales volume rise during weeks when states suspend taxes on sales by retailers?

The reduction in taxes will cause the price to demanders to fall and hence the equilibrium quantity demanded will rise.

Assume you have created a line graph with the equation I = 8 x H, where I is your income and H is the number of hours you work. What would happen to the graphed line if you got a raise and made $10 an hour instead of $8?

The slope of the line would increase and become steeper.

If the cost of flour increases, what will be the effect on a baking firm's supply curve for bread?

The supply curve will shift inward due to the change in input prices.

Opportunity cost rises more rapidly with quantity supplied for squid fisherman than for salmon farmers. Therefore,

The supply of salmon increases more rapidly then the supply of squid and the supply of squid is more elastic than salmon

Suppose that in Canada the government places a $1,500 tax on the buyers of new snowmobiles. After the purchase of a new snowmobile, a buyer must pay the government $1,500. How would the imposition of the tax on buyers be illustrated in a graph?

The tax will shift the demand curve to the left, and the distance between two demand curves would be $1,500.

Which of the following statements is true?

The value of a good may change over time

Suppose the market equilibrium price of corn is $5 per bushel, and the government sets a price ceiling of $4 per bushel. What is the most likely result of this action?

There will be a shortage of corn.

Given the demand and supply conditions shown in Figure 4-4, what will happen as the result of imposing a price ceiling of a?

There will be a shortage of the product.

If a government-imposed price floor legally sets the price of milk above market equilibrium, which of the following will most likely happen?

There will be a surplus of milk.

Suppose the market equilibrium price of wheat is $5 per bushel, and the government sets a price floor of $7 per bushel to aid growers. What is the most likely result of this action?

There will be a surplus of wheat.

How do economists account for unpredictability for people when they make theories about people's behavior?

They assume people's divergent tendencies balance each other out toward an average

How do economists account for the differences among individuals when they theorize about people's economic behavior?

They assume that people's different tendencies balance each out toward a group average

The price of airline tickets rises during the summer months because demand for airline travel increases as more people take vacations. How will this affect the supply and demand curve for airline tickets?

This change in consumer tastes causes a shift of the demand curve to the right. The equilibrium price increases as does the equilibrium quantity

Which of these is an example of the fallacy that association is causation?

Thunder causes lightning

Which of the following falls into the category of microeconomics?

Timber regulations

True or False: A line that rises as it moves from left to right has a positive slope.

True

True or False: Both people and countries are motivated by their opportunity costs to specialize.

True

True or False: Distinguishing between two theories that explain measurements or observations equally well can be a problem for economists.

True

True or False: Voluntary trade mutually benefits those who participate in it because of the differences between opportunity costs.

True

failing to understand the ceteris paribus assumption and confusing association and causation

Two of the most common pitfalls to clear economic thinking are:

One central feature of economic thinking is to?

Understand markets as a means of coordinating choices

What best describes North Korea's economic system?

Very hierarchical

You're a commodity trader and you've just heard a report that the winter wheat harvest will be 2 billion bushels, a 40 percent jump, rather than an expected 30 percent jump. What would you expect would happen to wheat prices?

Wheat prices would decline since the supply of wheat is greater than expected

Which of the following is a major implication of the invisible hand concept?

When directed by competitive market prices, the actions of self-interested individuals will tend to promote overall economic prosperity.

When is an economic policy said to improve efficiency?

When it makes at least one person better off and makes no one worse off

THE RISE OVER THE RUN

When we talk about the slope of a line we mean:

Buyers and sellers interact to exchange goods

Which of the following is an advantage of pure capitalism?

Formulate an irrefutable hypothesis.

Which of the following is not part of the model-building process?

ENTREPRENEURSHIP

Which of the following is sometimes considered the fourth factor of production?

The value of a good may change over time.

Which of the following statements is true?

A firm's production decisions

Which of the following would not be studied by a macroeconomist?

John consumes only two goods, pizza and pasta. Both goods are normal goods for John. He is currently maximizing his utility in consumption of both goods. Now assume the price of pasta rises. As he adjusts to this event, the marginal utility of pizza: A) and of pasta will rise. B) and of pasta will fall. C) will fall, and the marginal utility of pasta will rise. D) will rise, and the marginal utility of pasta will fall.

Will fall, and the marginal utility of pasta will rise

If a decrease in the price of good Y causes the demand for good Z to decrease, this indicates that

Y and Z are substitutes

Is it possible for a good to become relatively less expensive even though its normal price rises?

Yes it is possible

Can markets be both formal and informal?

Yes they can be

Which of the following is not one of the four goals typically pursued by policy makers in economic systems?

Zero poverty

"The economic wealth of this country is primarily the result of the profit made by some individuals at the expense of others." The person who made this statement a. has failed to comprehend that mutual gains result from specialization and exchange. b. has failed to comprehend the fallacy of composition. c. has failed to understand the significance of the production possibilities constraint. d. has utilized the economic way of thinking; the statement is essentially correct.

If an economy is operating at a point inside the production possibilities curve, a. its resources are not being used efficiently. b. the curve will begin to shift inward. c. the curve will begin to shift outward. d. This is a trick question because an economy cannot produce at a point inside the curve.

If cable TV service and satellite TV service are substitutes, a. a decrease in the price of cable will decrease the demand for satellite TV. b. an increase in the price of cable will decrease the demand for satellite TV. c. an increase in the price of cable will generally have no effect on the demand for satellite TV. d. an increase in the price of cable will shift the demand curve for satellite TV to the left.

Joe and Ed go to a diner that sells hamburgers for $5 and hot dogs for $3. They agree to split the lunch bill evenly. Ed chooses a hot dog. The marginal cost to Joe then of ordering a hamburger instead of a hot dog is (hint: compare Joe's share of the bill when he orders a hamburger versus Joe's share of the bill when he orders a hotdog) a. $1. b. $2. c. $2.50. d. $3.

Producers are willing to offer greater quantities for sale at higher prices because a. they have the incentive to pay the increasing opportunity cost of resources necessary to produce more goods when they get paid more for selling them. b. they will decrease their profits by expanding production at higher prices c. the government orders them to do so d. lower prices attract new firms, which have higher costs of production e. they hire superior quality, higher-priced resources as production expands

The basic difference between macroeconomics and microeconomics is that a. macroeconomics is concerned with the forest (aggregate markets), while microeconomics is concerned with the individual trees (subcomponents). b. macroeconomics is concerned with policy decisions, while microeconomics applies only to theory. c. microeconomics is concerned with the forest (aggregate markets), while macroeconomics is concerned with the trees (subcomponents). d. opportunity cost is applicable to macroeconomics, and the fallacy of composition relates to microeconomics.

The idea that tradeoffs and opportunity costs of producing goods exist because of scarcity imply that the production possibilities curve will be a. downward sloping. b. upward sloping. c. bowed inward. d. bowed outward.

Which of the following would most likely increase the demand for peanut butter? a. a decrease in the price of jelly, a good that is often used with peanut butter b. the discovery that excessive consumption of peanut butter is harmful to one's health c. crop failures that raise the price of peanuts d. the invention of a new product that consumers think is a good substitute for peanut butter

Which one of the following is a positive economic statement? a. The average earnings of those with college degrees exceeds the earnings of those without college degrees. b. A college education is too expensive. c. Social justice will be served by forgiving everyone's student loan debt. d. The federal government should pay for everyone's college education.

Suppose the income elasticity of demand for toys is +2.00. This means that:

a 10 percent increase in income will increase the purchase of toys by 20 percent.

Read Eye on Elasticity At The Coffee Shop, then explain why the demand for latte is inelastic while the demand for a Starbucks latte is elastic. Explain why the demand for latte is inelastic while the demand for a Starbucks latte is elastic. Which demand is likely to be more inelastic: the demand for latte or the demand for coffee? The demand for latte is inelastic while the demand for a Starbucks latte is elastic because _______.

a Starbucks latte has many substitutes such as lattes from other coffee shops, but latte in general has poor substitutes

When Roxanne, a U.S. citizen, purchases a designer dress from Barneys of New York that was made in Milan, the purchase is

a U.S. import and an Italian export

In rental markets where price controls are in place, the law often says that the rent cannot increase as long as the lease is in effect. In these markets, tenants often sublet their apartments for more than the rent they pay. This practice is an example of

a black market.

A command economy is synonymous with:

a centrally planned economy

What happens if the price of beef and the quantity of beef are graphed, but the income of consumers increases?

a change in the demand for beef

For lawn mowers, what would cause a movement along the supply curve without shifting the curve?

a change in the price of hired lawn care services

In the hamburger restaurant business, an increase in the price for ground beef represents

a change in the price of inputs.

An increase in the market price of a product, all other things equal, results in

a change of position along the existing supply curve, increasing the quantity supplied.

an economic system characterized by choices based on the decisions of central planners is:

a command economy

consumer surplus is..

a concept that makes normative statements about the disirability of market outcomes. represented on a graph by the area below the demand curve and above the price. a good measurement of economic welfare if buyers preference are the primary concern.

Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $140. Amanda experiences:

a consumer surplus of $10 and Tony experiences a producer surplus of $190.

Comparative advantage demonstrates that:

a country should specialize in producing goods or services for which it has a lower opportunity cost.

What is one of the first signs of a shortage?

a decrease in inventory

Assuming gasoline and tires to be complementary goods, the initial effect on the tire market of an increase in the price of gasoline would best be described as?

a decrease in the demand for tires

If cable TV service and satellite TV service are substitutes,

a decrease in the price of cable will decrease the demand for satellite TV.

Which of the following would most likely increase the demand for peanut butter?

a decrease in the price of jelly, a good that is often used with peanut butter

Which of the following would lead to an increase in the demand for computer software?

a decrease in the price of personal computers

Which of the following would most likely cause the price of wheat to decline?

a decrease in the price of soybeans, a substitute for wheat

If the steelworkers' union negotiates a new contract with sharply higher wages, we would expect, once a new equilibrium is reached in the steel market?

a decrease in the quantity of steel demanded

Which of the following will cause a decrease in the demand for peanut butter?

a doubling of the price of bread

all other things being equal, the effect of a decrease in the price of soda pop would cause which of the following?

a downward movement along the demand curve for soda pop

A rise in the price of coffee is likely to have the following initial effect on the market for tea, a substitute for coffee?

a downward movement along the tea demand curve

Which of the following would not be studied by a macroeconomist?

a firm's production decision

Supply Curve

a function showing the quantity of a good that suppliers would be willing and able to sell at different prices

Demand Curve

a function that shows the quantity demanded at different prices

productions possibilities frontier

a graph that shows the maximum attainable combinations of two products that may be produced with available resources and technology

If the price of leather rises, other things being equal, which of the following would be the most likely initial effect?

a leftward shift in the shoe supply curve

An increase in the cost of raising hogs, other things being equal, would be likely to affect the price of bacon via what?

a leftward shift of the supply curve

The legislative intent of minimum-wage laws is to ensure

a minimally adequate standard of living.

the minimum wage was instituted to ensure workers..

a minimally adequate standard of living.

An increase in the price of beef increases the demand for pork. Restoration of equilibrium in the pork market will require?

a movement up along the supply curve

An inward shift of a nation's production possibilities frontier can occur due to

a natural disaster like a hurricane or bad earthquake.

The earned income tax credit is closest in concept to what?

a negative income tax

The midpoint formula for elasticity will always directly result in?

a negative number

An inverse relationship indicates?

a negative slope

Which of the following would reduce the supply of tennis shoes?

a new tax imposed on the producers of tennis shoes

A direct relationship indicates?

a positive slope

An increase in the demand for chocolate bars results in

a price increase and a quantity increase.

Both price floors and price ceilings lead to

a reduction in the quantity traded.

If consumer incomes go up, which of the following is initially most likely?

a rightward shift in the demand curve for cars

If consumer incomes go up, which of the following is most likely initially?

a rightward shift in the demand curve for cars

A rise in the price of coffee is likely to have which of the following initial effects on the market for tea, a substitute?

a rightward shift in the tea demand curve

What effect does a shift in demand have on the supply curve?

a shift in demand causes movement along the supply curve

Suppose hot dogs are an inferior good. An increase in consumer incomes, other things being equal, is likely to cause what?

a shift in the demand curve and a lower price

Suppose hot dogs to be an inferior good. An increase in consumer incomes, other things being equal, is likely to cause?

a shift in the demand curve and a lower price

A change in price of a particular good indicates all of the following except

a shift in the demand curve.

What economic term does a queue of buyers indicate?

a shortage

When inventories run low and below planned levels, what might occur?

a shortage

According to supply and demand analysis, the likely effect on a minimum wage law would be?

a shortage of jobs for low-skill workers

A hypothesis is:

a statement explaining how variables relate to one another

To attract the attention of potential customers, a bank spends $500 to hire a band to play at the opening of a branch in a new shopping center. With regard to the ongoing operations of the new branch, the cost of hiring the band is considered to be?

a sunk cost

A queue of sellers indicated which economic term?

a surplus

When inventories run high and above planned levels, which of the following might occur?

a surplus

if a binding price floor is imposed on the market for ebooks, then..

a surplus of ebooks will develop.

The institution of a minimum wage creates

a surplus of labor.

If the equilibrium price of sugar is 15 cents per pound and the government imposes a minimum price of 20 cents per pound, what will happen?

a surplus of sugar

what is a supply schedule?

a table relating prices to quantity supplied at each price

what is a demand schedule?

a table showing price and quantity demanded relationship of a good (ceteris paribus) only looking at price and quantity demanded while all other things remain equal

A supply schedule is

a table showing the relationship between the price of a good and the quantity supplied.

the benefit that government receives from a tax is measured by..

a tax revenue.

On a demand and supply graph, the sales revenue is shown as

a vertical distance times a horizontal distance.

What is the graph for perfectly inelastic demand?

a vertical line

A recent Wall Street Journal article describes how the salaries paid to German engineers are rising sharply. The article bears the headline, "In Germany, the Demand for Engineers outruns Supply." Think like an economist: Which of the following headlines expresses the issue correctly? a. "In Germany, the Demand for Engineers has Increased." b. "In Germany, the Demand for Engineers is above the Supply." c. "In Germany, the Market for Engineers is not in Equilibrium." d. "In Germany, the Supply of Engineers is not Upward Sloping." e. The original headline is expressed correctly.

a. "In Germany, the Demand for Engineers has Increased."

The economist Bryan Caplan recently found a pair of $10 arch supports that saved him from the pain of major foot surgery. As he stated on his blog (http://econlog.econlib.org), he would have been willing to pay $100,000 to fix his foot problem, but instead he only paid a few dollars. If the sales tax was 5 percent on this product, how much revenue did the government raise when Bryan bought his arch supports? If the government could have taxed Bryan based on his willingness to pay instead of on how much he actually paid, how much sales tax would Bryan have had to pay? a. $0.50; $5,000 b. $0.50; $4,999.50 c. $5,000; $0.50 d. $4,999.50; $0.50

a. $0.50; $5,000

What should happen to the demand for speed (measured by the average speed on highways) once airbags are included on cars? a. Demand for speed will fall as the airbag light on your dashboard warns you of the potential for accidents. b. Demand for speed will rise because people feel they would be safer if an accident occurs. c. Demand for speed will remain unchanged, because people's desire to drive fast is unrelated to airbags. d. All of the answer choices are correct.

a. Demand for speed will fall as the airbag light on your dashboard warns you of the potential for accidents.

Cars and gasoline are complements. What will happen to the demand curve for gasoline if the price of cars decreases? a. The demand curve for gasoline will shift upward and to the right. b. The demand curve for gasoline will shift downward and to the left. c. There will be an upward movement along the original demand curve. d. There will be a downward movement along the original demand curve.

a. The demand curve for gasoline will shift upward and to the right.

Consider farmers who have land that is suitable for growing both wheat and soybeans. Suppose all farmers are currently farming wheat, but the price of soybeans rises dramatically. How does this affect the opportunity cost of producing wheat? a. The opportunity cost of wheat production increases. b. The opportunity cost of wheat production decreases. c. The opportunity cost of wheat production remains the same. d. All of the answer choices are correct.

a. The opportunity cost of wheat production increases.

Consider farmers who have land that is suitable for growing both wheat and soybeans. Suppose all farmers are currently farming wheat, but the price of soybeans rises dramatically. How does this affect the supply curve for wheat? a. The supply curve shifts up and to the right. b. The supply curve shifts down and to the left. c. The supply curve remains the same. d. All of these are correct.

a. The supply curve shifts up and to the right.

The industrial areas in northeast Washington, D.C., were relatively dangerous in the 1980s. Over the last two decades, the area has become a safer place to work (although there are still seven times more violent crimes per person in these areas than in a nearby neighborhood called Georgetown). When an area becomes a safer place to work, what likely happens to the supply of labor in that area? a. The supply of labor increases. b. The supply of labor decreases. c. The supply of labor remains unchanged. d. All of these are correct.

a. The supply of labor increases.

Evaluate the accuracy of the following statement: People search harder for substitutes for oil when the price of oil is high. a. True; when oil prices are high, there are greater potential savings from oil substitutes. b. False; people will demand the same amount of oil regardless of the price. c. False; when oil prices are high, oil substitutes are relatively less valuable. Thus, people will demand more oil and less oil substitutes. d. The answer cannot be determined, because not all consumers place the same value on oil.

a. True; when oil prices are high, there are greater potential savings from oil substitutes.

Butter and margarine are substitutes. When the price of margarine increases, what will happen to the demand for butter? Why? a. When the price of margarine rises, some people will switch from margarine to butter. Because of this, demand will increase, making butter's demand curve shift up and to the right. b. When the price of margarine rises, some people will switch from margarine to butter. Because of this, demand will increase, making butter's demand curve shift down and to the left. c. When the price of margarine rises, some people will switch from margarine to butter. Because of this, the quantity demanded increases, resulting in a downward movement along the original demand curve for butter. d. When the price of margarine rises, some people will switch from margarine to butter. Because of this, the quantity demanded increases, resulting in an upward movement along the original demand curve.

a. When the price of margarine rises, some people will switch from margarine to butter. Because of this, demand will increase, making butter's demand curve shift up and to the right.

Glass is an input for producing both windows and bottles. However, glass bottles are a less valuable product than glass windows. If the price of glass increases dramatically, what are we likely to see a lot less of: glass windows or glass bottles? Why? a. bottles b. windows c. both d. neither

a. bottles

According to the supply curve, if the price of cars ______ carmakers will produce ______ cars. a. falls; fewer b. falls; more c. rises; fewer d. We need more information about the situation to determine what will happen

a. falls; fewer

Petroleum, natural gas, coal, and solar power are all sources used to produce energy, and, therefore, can be considered to be substitutes. When the price of petroleum increases, the demand for natural gas ______, the demand for coal ______, and the demand for solar power ______. a. increases; increases; increases b. increases; increases; decreases c. decreases; decreases; increases d. decreases; decreases; decreases

a. increases; increases; increases

A pharmaceutical business is ______ likely to hire highly educated workers and use new, experimental research methods when it expects the price of its new drug to be ______. a. more; high b. less; high c. more; low d. A, B, and C are all possible.

a. more; high

Pizza parlors hold a big pizza sale. Pizza parlor owners must believe that a. the demand for pizza is elastic b. the demand for pizza is inelastic c. the supply of pizza is greater than the demand d. the demand for pizza is greater than the supply

a. the demand for pizza is elastic

When there is surplus (excess supply) a. there is downward pressure on price, until it reaches equilibrium. b. there is upward pressure on price, until it reaches equilibrium. c. the market is in equilibrium. d. there are too many buyers chasing too few goods. e. a shortage will result.

a. there is downward pressure on price, until it reaches equilibrium.

Which of the following will NOT increase the supply of titanium golf clubs? a.A rise in the demand for golf clubs. b.A fall in the price of titanium. c.An improvement in golf club making technology. d.All of the above will increase supply.

a.A rise in the demand for golf clubs.

Which of the following would not be expected to decrease the demand (shift the demand curve) for grape soda? a.An increase in the price of grape soda. b.A decrease in the price of orange soda. c.A fall in income (grape soda is a normal good). d.All of the above would decrease the demand for grape soda.

a.An increase in the price of grape soda.

What happens in the market for ink when the price of the lead used to make pencils rises? a.Demand increases. b.Demand decreases. c.Supply increases. d.Supply decreases. e.None of the above, because ink isn't used in lead.

a.Demand increases.

If a 10% increase in the price of beer reduces the quantity demanded by 8%, then demand for beer is a.Inelastic b.elastic c.unit elastic d.had increased e.had decreased

a.Inelastic

Supply and demand are always more elastic in the long-run because a.a greater range of actions can be taken in longer periods. b.price generally declines over time. c.price generally rises over time. d.people value wealth more in longer periods. e.incomes rise over time.

a.a greater range of actions can be taken in longer periods.

A supply curve slopes upwards because a.an increase in price gives producers incentive to provide a larger quantity. b.an increase in input prices means supply increases. c.as more is produced, per unit production costs fall. d.the supply curve must intersect the demand curve.

a.an increase in price gives producers incentive to provide a larger quantity.

A frost that destroys half of Florida's orange crop will make orange growers unhappy only if a.demand for oranges is elastic b.demand for oranges is inelastic c.supply of oranges is elastic d.supply of oranges is inelastic

a.demand for oranges is elastic

If you drop your prices and total revenue increases, demand must be a.elastic b.inelastic c.unit elastic d.downward sloping, but there is not enough information to know the elasticity.

a.elastic

If the demand for french bread is elastic and the baker holds a french bread sale a.he will sell a lot more bread. b.he may sell more bread, but not a lot more. c.he won't sell any more bread. d.demand will increase.

a.he will sell a lot more bread.

Which of the following would you expect to have the least elastic demand? a.penicillin. b.bananas. c.bananas from Columbia. d.bananas from Columbia sold at Albertsons. e.All would have equal elasticity of demand, because each would have a downward sloping demand curve.

a.penicillin.

In the Wealth of Nations, Adam Smith advocated all of the following except:

abolishing laissez-faire policies.

The rebound effect causes a proportional increase in?

absolute externalities directly related to the nature of the rebound effect

Given that resources are scarce, one should allocate resources?

according to the cost-benefit principle

In order to find the market quantity demanded,

add the individual quantities demanded by each individual consumer.

Total Consumer Surplus

adding up consumer surplus for each consumer and for each unit (area on a graph beneath the demand curve and above the price)

Marginal benefit is equal to the ________ benefit to a consumer receives from consuming one more unit of a good or service.

additional

When the government taxes a good or service, it

affects the market equilibrium for that good or service.

On a demand curve,

all nonprice determinants are held constant.

suppose a tax of $1 per unit is imposed on a good. the more elastic the supply of the good, other things equal, the..

all of the above are correct.

A price support program requires that the government

all of the above.

Factors that shift the demand curve include

all of the above.

The market supply of a good or service

all of the above. (A market supply curve is the horizontal summation of all individual supply curves. Thus, it reflects all individual determinants and the number of sellers. Like individual supply curves, the market supply shows a positive relationship between price and quantity supplied.)

One method that employers could use to pass the costs of a government-imposed minimum wage to their employees would be to

all of the above. (A method that employers may use to transfer some of the cost of the minimum wage is to reduce employee benefits. Each of the answers is an example of a benefit that might be reduced.)

Comparative statics is the study of

all of the above. (Comparative statics is the study of the change in equilibrium price and quantity when one of the determinants of demand or supply changes. Economists analyze what happens in a market after such a change, and then explain it in economic terms.)

The competitive equilibrium point occurs when

all of the above. (In a competitive equilibrium, there is no pressure to change either price or quantity because there is no excess demand or excess supply.)

The upward-sloping supply curve

all of the above. (The upward-sloping supply curve says that, at higher prices, suppliers are willing and able to put more product on the market. The supply curve is the suppliers' opportunity cost because it represents the prices at which suppliers will add one more unit, foregoing production of something else.)

If the cost of flour decreases, the result(s) for a bread baking firm will be

all of the above. (When flour prices decrease, input prices have fallen. This results in lower costs and a shift in the supply curve outward.)

the scientific method:

all of these. the four-step process; it requires certain assumptions and simplifications; and it's used in economics

in the market for credit, the interest rate is the price people pay to borrow money for a given time. the only thing that wouldn't increase interest rates in the market for credit it:

allowing foreign banks to compete in the domestic credit market

Quantity Demanded

amount of a good that consumers are willing and able to buy at any given price

Quantity Supplied

amount of a good that sellers will produce and bring to market at any given price

The main determinant of elasticity of supply is the:

amount of time the producer has to adjust inputs in response to a price change

On a supply and demand model, when the supply curve shifts to the left, the revenue that is gained is shown as

an area; the revenue loss is also an area.

A tax that imposes a small excess burden relative to the tax revenue that it raises is

an efficient tax

According to the graph, if the government imposes a minimum wage of $6 per hour in this labor market, there will be

an excess supply of 2,000 units of labor.

Pollution is an example of what?

an externality

If equilibrium price and quantity both rise, the cause is

an increase in demand without a change in supply.

Which of the following factors would cause the demand curve for a good to increase (shift to the right)?

an increase in the price of a substitute good

Two goods are considered substitutes if

an increase in the price of one leads to an increase in the demand for the other.

A technological improvement in agriculture makes it possible to grow three times as much wheat per acre as had been possible in the past. The most likely result will be

an increase in the supply of wheat because of the reduced cost of production.

An unintended consequence of minimum wage policy could be?

an increase in unemployment

A decrease in the supply of Ford and Chevrolet cars might be caused by

an increase in wages of U.S. car workers.

When income rises by 2 percent and other things remain the same, the quantity demanded of good C decreases by 3 percent. Good C is ______ good and as income rises, the demand for good C ______.

an inferior; decreases

In a hamburger restaurant, an increase in the price of ground beef causes

an inward shift of the supply curve.

Changes in revenue can be?

an unintended consequence for prohibitions

If the income elasticity of demand for lard is -3.00, this means that:

ard is an inferior good.

consumer surplus location on a graph

area below the demand curve and price

producer surplus location

area between the price and the supply curve

What are markets?

arrangement that individuals have for exchanging with one another. they represent interaction of buyers and sellers. Doesn't have to be at a physical location could be online like ebay, amazon, or the stock market

The movement along a demand curve is referred to?

as a change in quantity demanded

The implication for farmers of income inelasticty of most agricultural commodities is

as consumers' incomes increase, farm income will not increase by the same percentage.

The reason that producers supply more to a market at higher prices is that

as the price increases, the producers' opportunity cost of not producing that good increases.

The demand curve is downward-sloping because

as the price of the good rises, the quantity demanded falls.

A situation in which a country does not trade with other countries is called

autarky

"A reduction in gasoline prices caused the demand for gasoline to increase. The lower gas prices also led to an increase in demand for large cars, causing their prices to rise." These statements a. are essentially correct. b. contain one error; the lower gasoline prices would cause an increase in the quantity demanded of gasoline, not an increase in demand. c. contain one error; the lower gasoline prices would increase the quantity demanded of large cars, not the demand. d. contain two errors; the lower gasoline prices would cause the quantity of gasoline demanded (rather than the demand) to increase, and the lower gasoline price would cause an increase in quantity demanded (rather than the demand) for large cars.

If a firm or a nation desires to maximize its output, each productive assignment should be carried out by those persons who a. have the highest opportunity cost. b. have a comparative advantage in the productive activity. c. can complete the productive activity most rapidly. d. least enjoy performing the productive activity.

The invisible hand principle indicates that competitive markets can help promote the efficient use of resources a. only if buyers and sellers really care, personally, about economic efficiency. b. even when each market participant cares only about their own self interest rather than about the overall efficiency of resource use. c. even if business firms fail to produce goods efficiently. d. if, and only if, businesses recognize their social obligation to keep costs low and use resources wisely.

The primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is a. an expansion in investment resulting from a reallocation of resources away from consumption. b. a larger output resulting from a more efficient use of resources. c. greater equality of income resulting from an increase in the number of workers. d. an increase in the profitability of business enterprises resulting from an increase in investment.

Which one of the following states a central element of the economic way of thinking? a. Scarce goods are priceless. b. Incentives matter—human choice is influenced in predictable ways by changes in personal costs and benefits. c. The realism of the assumptions is the best test of an economic theory. d. When deciding how to allocate time, the concept of opportunity cost is meaningless.

While waiting in line to buy two tacos at 75 cents each, and a medium drink for 80 cents, Jordan notices that the restaurant has a value meal containing three tacos and a medium drink all for $2.50. For Jordan, the marginal cost of purchasing the third taco would be a. zero. b. 20 cents. c. 75 cents. d. 80 cents

Your roommate just bought an iPod for $200. She would have been willing to pay $500 for a machine that could store and replay that much music. How much consumer surplus does your roommate enjoy from the iPod? a. $500 b. $300 c. $200 d. $0

b. $300

Michael is an economist. He loves being an economist so much that he would do it for a living even if he only earned $30,000 per year. Instead, he earns $80,000 per year. (Note: This is the average salary of new economists with a PhD degree.) How much producer surplus does Michael enjoy? a. $80,000 b. $50,000 c. $30,000 d. $0

b. $50,000

Economists estimated the supply elasticity of rice as 0.4. At price $10, 100 bags would be supplied. If Government wants to increase the quantity of supply to 108, how much should be the new price? a. 9 b. 12 c. 14 d. 15

b. 12

Which of the following will increase the demand for tennis balls? a. A decrease in the cost of the material tennis balls are made of. b. A decrease in the cost of producing tennis rackets (complements) . c. A decrease in the cost of producing the machines used to make tennis balls. d. All of the above. e. None of the above.

b. A decrease in the cost of producing tennis rackets (complements) .

Which of the following will increase the demand for snowboards? a. A fall in snowboard prices. b. A fall in the price of lift tickets (complement). c. A new technology that enables snowboards to be manufactured for half the cost. d. A big sale on skis (substitute). e. All of the above will increase the demand for snowboards.

b. A fall in the price of lift tickets (complement).

If everyone thinks that the price of gasoline will increase next week, what is likely to happen to the demand for gasoline today? a. Demand will increase, mostly because consumers will buy more gas in anticipation of the price rise. b. Demand will increase, mostly because owners of gas stations will want to fill up their storage tanks before the price increases. c. Demand will increase, mostly because gasoline refineries will refuse to sell as much gas today, holding back their stock until the price increases. d. Demand will decrease because consumers will buy less gas today in an attempt to prepare themselves for higher prices in the future.

b. Demand will increase, mostly because owners of gas stations will want to fill up their storage tanks before the price increases.

When the price of Apple computers declines, what probably happens to the demand for Windows-based computers? a. It increases, because Apple computers and Windows-based computers are complements. b. It decreases, because Apple computers and Windows-based computers are substitutes. c. It increases, because Apple computers and Windows-based computers are substitutes. d. It decreases, because Apple computers and Windows-based computers are complements.

b. It decreases, because Apple computers and Windows-based computers are substitutes.

If the price of oil falls, what will happen to the quantity of oil supplied? a. It increases, because consumers want more oil. b. It decreases, because some oil deposits are no longer worth tapping. c. It remains unchanged, because the world's total oil supply is fixed. d. The quantity changes in a way that cannot be predicted without further information.

b. It decreases, because some oil deposits are no longer worth tapping.

Imagine that a technological innovation reduces the costs of producing high-quality steel. What happens to the supply curve for steel? a. Supply increases and the supply curve shifts up and to the left. b. Supply increases and the supply curve shifts down and to the right. c. Supply decreases and the supply curve shifts up and to the left. d. Supply decreases and the supply curve shifts down and to the right.

b. Supply increases and the supply curve shifts down and to the right.

Which of the following would make the demand for education at Clemson more elastic? a. An improvement in the quality of Clemson education. b. The founding of four more universities in South Carolina. c. A fall in the price of textbooks. d. A rise in local land prices.

b. The founding of four more universities in South Carolina.

A decrease in the supply of aluminum bicycles could result from a. the development of a low-cost bike-making technology. b. a rise in the price of aluminum. c. an increase in the supply of aluminum. d. a fall in the demand for aluminum bicycles.

b. a rise in the price of aluminum.

The demand curve is a function that shows the _____ at a range of prices. a. goods supplied b. quantity demanded c. goods demanded d. buyers' demand

b. quantity demanded

The imposition of an excise tax (production tax) on each unit produced will cause: a. supply to increase. b. supply to decrease. c. supply to remain unchanged. d. All of these are correct, depending on the nature of the tax.

b. supply to decrease.

A businesswoman says "No matter how much we cut price, we just don't seem to get any new customers." In other words, she thinks demand for her product is a.elastic b.inelastic c.unit elastic d.less than the supply.

b.inelastic

If the price of grapes falls a.demand for grapes increases. b.the quantity of grapes demanded increases. c.there will be a grape shortage. d.All of the above.

b.the quantity of grapes demanded increases.

A demand curve indicates the value consumers get from a good. It is measured as a.the benefits people receive less the cost. b.the quantity people will buy at various prices. c.the prices people prefer to pay. d.All of the above.

b.the quantity people will buy at various prices.

If the supply of a good is absolutely fixed (like wine bottled in 1983) a.the supply curve will be horizontal. b.the supply will be vertical. c.the supply curve will slope downward. d.the good will have no supply curve.

b.the supply will be vertical.

The odd paradox in agricultural markets is that

bad weather can actually increase farm income.

Traditional economies:

base their economic decisions on the customs or religious practices of ancestors.

A Griffin good would have to?

be an inferior good

Compared to the price elasticity of demand for gasoline, the demand for Texaco gasoline will

be more elastic than the demand for gasoline in general.

Why does the supply curve have a positive slope?

because the quantity supplied increases as price increases

To evaluate whether a family is above the poverty threshold, the government's measure of income is?

before-tax income plus cash transfers

Sellers in markets that operate without inventories do not need to wait to?

begin production until they have a contract with a buyer

Under autarky, consumer surplus is represented by the area

below the demand curve and above the equilibrium price

in the period 1970-2005, according to the official poverty measures, about what percent of the population of the United States lived in poverty?

between 11 and 14 percent

What range of numbers represents inelastic demand?

between zero and one

a shortage results when?

binding price ceilings are imposed on a market.

a surplus results when a..

binding price floor is imposed on a market.

Suppose the equilibrium price for an apartment in a market is $1,500 a month. The government controls the price by imposing a price ceiling of $750. However, the consumer may still pay $1,500 because

both A and B. (Many times, rent control ends in the same equilibrium point above the price ceiling. Buyers and sellers enagage in illegal collusion or agree in some other way to avoid the ceiling.)

productive efficiency means:

both an increase in the production of one good cannot occur without a decrease in the production of another good, and the economy is producing on its PPF

dawns bridal boutique is having a sale on evening dresses. the increase in consumer surplus comes form the benefit of the lower prices to..

both existing costumers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices.

a nation's PPF will shift out by the largest amount if

both most of the resources in the nation are used to produce capital goods, and technology advances

Suppose that in the market for an agricultural commodity such as corn, there is a large increase in the quantity traded. However, the price remains almost the same. The most likely explanation for this phenomenon is that

both supply and demand have increased.

Increasing opportunity cost is represented by a ________ production possibilities frontier

bowed out

Increasing opportunity cost is represented by a ________ production possibilities frontier.

bowed out

Free enterprise allows:

buyers and sellers to exchange goods in a free market, with price indicating value

if a tax is levied on the sellers flour the..

buyers and sellers will share the burden of the tax.

demand is said to price elastic if..

buyers respond substantially when income or the expected future price of the good changes.

"Now that Blake paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both." This statement most clearly reflects a. the importance of secondary effects. b. the fallacy of composition. c. the law of comparative advantage. d. behavior inconsistent with economizing

A cold spell in Florida extensively reduced the orange crop, and as a result, California oranges commanded a higher price. Which of the following statements best explains the situation? a. The supply of Florida oranges fell, causing the supply of California oranges to increase as well as their price. b. The supply of Florida oranges fell, causing the supply of California oranges to decrease and their price to increase. c. The supply of Florida oranges fell, causing their price to increase and the demand for California oranges to increase. d. The demand for Florida oranges was reduced by the freeze, causing an increase in the price of California oranges and a greater demand for them.

A production possibilities curve that is bowed outward represents the idea of a. constant opportunity costs. b. decreasing opportunity costs. c. increasing opportunity costs. d. a world without scarcity and tradeoffs

If Harry only pays $25,000 to purchase a new car even though he would have been willing to pay as much as $35,000 for the car, this indicates that a. Harry is an irrational consumer. b. The seller earned a $10,000 profit on the sale of the car. c. Harry reaped $10,000 of consumer surplus from the transaction. d. The seller received $10,000 worth of producer surplus on the transaction.

The expression, "There's no such thing as a free lunch," implies that a. everyone has to pay for his own lunch. b. the person consuming a good must always pay for it. c. opportunity costs are incurred when resources are used to produce goods and services. d. no one has time for a good lunch anymore.

The number of people willing to buy tickets to the Super Bowl is invariably greater than the number of tickets (and seats) available. This is evidence that the price of the tickets is a. higher than the equilibrium price. b. equal to the equilibrium price since the number of tickets bought equals the number sold. c. lower than the equilibrium price. d. higher than the equilibrium price when the demand is inelastic but lower when the demand is elastic.

The price of an airline ticket from Denver to Washington, D.C. costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than a. $6 per hour. b. $8 per hour. c. $10 per hour. d. $15 per hour.

When the market for a good is in equilibrium, a. consumer surplus will equal producer surplus. b. the total value created for consumers will equal the total cost of production for business firms. c. all units valued more highly than the opportunity cost of production will be supplied. d. all units that have value will be produced, regardless of their cost of production.

Which of the following is most clearly consistent with the basic postulate of economics regarding the reaction of people to a change in incentives. a. Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. b. People will buy more milk at a price of $2 per gallon than at $1 per gallon. c. People will buy less gas if the price of gas increases by $.20 per gallon. d. People will consume more beef if the price increases from $1 to $2 per pound.

c. $99,990

If the price for a 50-inch plasma TV is $2,010 and Newhart is willing to pay $3,000, what is Newhart's consumer surplus? a. $3,000 b. $2,010 c. $990 d. $0

c. $990

Suppose the elasticity of demand for heroin is -0.4. If, as a result of the DEA's new policy, heroin prices rise by 10%, heroin consumption will fall by a. 400% b. 40% c. 4% d. 0.4% e. There is not enough information to answer.

c. 4%

If everyone believes that the price of tomatoes will increase next week, what is likely to happen to demand for tomatoes today? a. Demand will decrease because people will buy fewer tomatoes now, in anticipation of the price rise. b. Demand will increase because sellers will hold back tomatoes, hoping to get a higher price for them next week. c. Demand will increase as people buy more tomatoes now, hoping to beat the price rise. d. Both B and C are correct.

c. Demand will increase as people buy more tomatoes now, hoping to beat the price rise.

The government decides that it wants to increase the quantity of solar panels in use, so it offers a $20 subsidy per panel to producers. What happens to the supply curve of solar panels? a. The supply curve does not change. b. The supply curve shifts inward. c. For each quantity along the supply curve, the price will shift down by $20. d. Supply decreases.

c. For each quantity along the supply curve, the price will shift down by $20.

Suppose the weather gets so hot in Clemson that some ice cream delivery trucks won't start. What would happen to the equilibrium price and quantity of ice cream? (Hint: Consider demand too) a. Price would rise and quantity would fall b. Price would fall and quantity would rise c. Price would rise but the effect on quantity would be uncertain d. Quantity would fall but the effect on price would be uncertain

c. Price would rise but the effect on quantity would be uncertain

If a good is "normal," an increase in income will result in a. no change in demand for the good b. a decrease in demand for the good c. an increase in demand for the good d. no change in demand, but a movement along the demand curve

c. an increase in demand for the good

Which factor decreases demand? a. an increase in income b. a decrease in natural resources c. an increase in the price of complements d. a decrease in input prices

c. an increase in the price of complements

When the price of a good increases, the quantity demanded ______. When the price of a good decreases, the quantity demanded ______. a. rises; rises b. rises; falls c. falls; rises d. falls; falls

c. falls; rises

For most young people, working full-time and going to school are substitutes; you tend to do one or the other. Thus, when it's tough to find a job, this ______ the opportunity cost of going to college and the demand for college ______. a. raises; rises b. raises; falls c. lowers; rises d. lowers; falls

c. lowers; rises

Producer surplus is the difference between the _____ price and the minimum price at which a producer would be willing to sell a particular quantity. a. import b. minimum c. market d. maximum

c. market

If price elasticity of demand for a good is 3, then a 10% increase in price would be expected to result in a a.3% decrease in quantity demanded b.3% increase in quantity demanded c.30% decrease in quantity demanded d.300% decrease in quantity demanded e.a 10% increase in quantity demanded

c.30% decrease in quantity demanded

Which of the following will increase the supply (i.e., shift the supply curve) of brass key rings? a.A rise in the demand for key rings. b.A rise in the price of brass. c.An improvement in key ring-making technology. d.All of the above. e.Just a and c.

c.An improvement in key ring-making technology.

For which of the following is demand likely to be the most elastic? a.Bread b.Sourdough bread c.BiLo's Wheat sourdough bread d.All will have equally elastic demand

c.BiLo's Wheat sourdough bread

When the supply and demand for a good both increase, a.equilibrium price will increase. b.equilibrium price will decrease. c.equilibrium price may increase, decrease, or remain unchanged. d.equilibrium price will increase if we are dealing with a normal good.

c.equilibrium price may increase, decrease, or remain unchanged.

If a $1 increase in price reduces the quantity demanded by 10%, we know that demand a.is inelastic, but we don't have enough information to calculate the elasticity b.is elastic, but we don't have enough information to calculate the elasticity c.is downward sloping, but we don't have enough information to calculate the elasticity d.has an elasticity of 10 e.has an elasticity of .1

c.is downward sloping, but we don't have enough information to calculate the elasticity

Which of the following is likely to have the least elastic supply? a.Coca Cola. b.soft drinks. c.paintings by Rembrandt. d.automobiles. e.Oil

c.paintings by Rembrandt.

The "law of demand" a.determines the equilibrium price. b.doesn't hold for scarce goods. c.says that people buy less of a good when price rises. d.applies only to consumer goods.

c.says that people buy less of a good when price rises.

You have an absolute advantage whenever you

can produce more of something than others with the same resources.

A factory belongs to which category of the factors of production?

capital

What are some examples of Normal Goods?

cars, electronics, and restaurant meals

what causes a decrease in quantity supplied?

caused by a decrease in the price of the good. price decrease causes quantity supplied to decrease

what causes an increase in quantity supplied?

caused by an increase in the price of the good. price increase causes quantity supplied to increase

what causes a change in supply (shift)?

caused by non-price factors affecting production

a binding price floor.

causes a surplus. and is set at a price above the equilibrium price.

Which of the following are important assumptions that economists make when developing theories?

ceteris paribus and self-interest

what causes a change in quantity supplied?

change in the price of the good

The price of chicken increases as the result of higher beef prices. This indicates that

chicken and beef are substitutes.

The mainstream approach to economics is said to be?

closely analyzes issues such as trust, morals, and human motivations

Markets and hierarchies can what?

coexist and carry complementary roles

Read Eye on Elasticity At The Coffee Shop, then explain why the demand for latte is inelastic while the demand for a Starbucks latte is elastic. Explain why the demand for latte is inelastic while the demand for a Starbucks latte is elastic. Which demand is likely to be more inelastic: the demand for latte or the demand for coffee? The demand for _______ is likely to be more inelastic than _______.

coffee; latte because a latte has more substitutes than coffee

Taxes are an example of _____ elements in our economic system.

command

An economic principle that explains why countries produce different goods and services is

comparative advantage

________ is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.

comparative advantage

what is the fundamental basis for trade among nations?

comparative advantage.

If in increase in the price of one good results in a decrease in demand for another good, what are these two goods considered?

complementary goods

if the cross price elasticity of two goods are negative, then the two goods are..q

complements.

A survey found that when incomes increased by 10 percent, the following changes in quantities demanded occurred: computers up by 12 percent, smartphones up by 8 percent, and calculators down by 1 percent. Calculate the income elasticity of demand for computers, smartphones, and calculators. The demand for _____ is income elastic and the demand for _____ is income inelastic.

computers and smartphones

The consumers' budget is best thought of as a?

constraint on the consumers' range of choice

when a country allows trade and becomes an exporter of a good..

consumer surplus and producer surplus both decrease.

when a country allows trade and becomes an exporter of a good,

consumer surplus decreases and producer surplus increases.

when a country allows trade and becomes an exporter of that good..

consumer surplus decreases and producer surplus increases.

when a country abandons a no trade policy, adopts a free trade policy, and becomes an importer of a particular good..

consumer surplus increases and total surplus increases in the market for that good.

economic surplus

consumer surplus+producer surplus

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

consumer surplus.

the benefit to buyers participating in a market is measured by..

consumer surplus.

When consumers and producers follow price controls, consumer costs can sometimes be as much as the original equilibrium price, if not more, because

consumers are forced to pay for their rent-seeking activities.

The demand for a product is inelastic with respect to price if:

consumers are largely unresponsive to a per unit price change

An increase in the demand for a good means that

consumers are willing to purchase more of the good at each possible price.

money acts as a rationing device for goods and services in a market economy. this means:

consumers who are willing and able to pay for a good are usually able to get the good

Money acts as a rationing device for goods in a market economy. This means:

consumers who are willing and able to pay for a good are usually able to get the good.

The law of demand states that, all other things being equal,

consumers will buy more of a good if price falls.

All of the following factors influence how much of a product is supplied to a market except

consumers' income.

The price elasticity of demand helps producers because it calculates ___________ response to a change in __________.

consumers'; price

The principles of basic economic models should not?

contradict those of more complex models

In the U.S. steel market, a "Buy American" provision in the 2009 stimulus package would

convert some consumer surplus to deadweight loss.

How do consumers respond to shortages?

cut back on planned purchases

Does voluntary exchange create wealth (value)? a. No, exchange does not expand output. b. No, if one person gains, the other party must lose an equal amount. c. Uncertain: It does when it results in the creation of additional goods and services; otherwise, it does not. d. Yes, trade generally permits the trading partners to gain more of what they value; this is why they agree to the terms of the exchange.

Economic analysis assumes that a. individuals act only out of selfish motives. b. although individuals are at times selfish and at times unselfish, only their selfish actions may be predicted. c. people are basically humanitarian, and their actions are, therefore, impossible to predict. d. changes in the personal benefits and costs associated with a choice will exert a predictable influence on human behavior

Economic choice and competitive behavior are the result of a. basic human greed. b. poverty. c. private ownership of resources. d. scarcity.

Price is important in a market economy because it a. eliminates imbalances between supply and demand. b. serves as the rationing mechanism for the limited supplies of goods and services. c. coordinates the choices of consumers and producers and brings them into harmony. d. is all of the above.

What do economists mean when they state that a good is scarce? a. There is a shortage or insufficient supply of the good at the existing price. b. It is impossible to expand the availability of the good beyond the current amount. c. People will want to buy more of the good regardless of the price of the good. d. The amount of the good that people would like exceeds the supply freely available from nature.

Which of the following will most likely occur under a system of clearly defined and enforced private property rights? a. Resource owners will fail to conserve vital resources, even if they expect their supply to be highly limited in the future. b. Resource owners will ignore the wishes of others, including others who would like to use the resource that is privately owned. c. Resource owners will fail to consider the wishes of potential future buyers when they decide how to employ privately owned resources. d. Resource owners will gain by discovering and employing their resources in ways that are highly valued by others.

You are chatting with Jerry and George. Jerry, who has not studied economics, says he is happy theater ticket prices have fallen. George, who has studied a little economics, tells Jerry not to get too happy - the price decrease will increase demand, and the increase in demand will raise ticket prices again. As an economist, what do you say? a. "You're right, George." b. "You're right, George, unless demand is elastic." c. "You're right, George, unless demand is inelastic." d. "You're wrong, George, because you're mixing up a shift in demand with a movement along the demand curve." e. "You're wrong, George, because you're failing to recognize that price would not have fallen unless supply was greater than demand."

d. "You're wrong, George, because you're mixing up a shift in demand with a movement along the demand curve."

A demand curve shows a. prices and quantities b. consumers' willingness to pay c. how much consumers value a good d. All of the above

d. All of the above

Which of the following will increase the equilibrium quantity of tennis balls? a. A decrease in the cost of the material tennis balls are made of. b. A decrease in the cost of producing tennis rackets. c. A decrease in the cost of producing the machines used to make tennis balls. d. All of the above. e. None of the above.

d. All of the above.

Olive oil and corn oil are very often considered to be substitute products. When the price of olive oil increases, what probably happens to the demand for corn oil? a. It decreases, because olive oil and corn oil are complements. b. It decreases, because olive oil and corn oil are substitutes. c. It increases, because olive oil and corn oil are complements. d. It increases, because olive oil and corn oil are substitutes.

d. It increases, because olive oil and corn oil are substitutes.

The DEA announces a new policy that increases jail time for anyone caught selling heroin. The policy may be expected to a. reduce the equilibrium quantity of heroin b. reduce the supply of heroin c. increase the price of heroin d. Just A and B. e. All of the above.

d. Just A and B.

Ferdinand Magellan, President of the Widget Club of America, is puzzled by the fact that the market price of widgets has doubled over the last six months, yet consumers are purchasing more widgets than they did at the lower price. "I know the Law of Demand", says Magellan, "and this clearly violates it." Help Magellan out - where is he going wrong? a. The Law of Demand is not really a law; it's more a guideline. b. The Law of Demand does not say by how much quantity changes when price changes. c. Magellan doesn't account for the fact that supply has probably shifted. d. Nothing odd is going on - the demand for widgets has increased. e. Magellan is mixing up quantity supplied and quantity demanded.

d. Nothing odd is going on - the demand for widgets has increased.

When oil companies expect the price of oil to be higher next year, what happens to the volume of oil produced today? a. Quantity supplied increases. b. Quantity supplied decreases. c. Supply increases. d. Supply decreases.

d. Supply decreases.

Timber prices decrease just as a fad for croquet sweeps the nation. What happens to the equilibrium price and quantity of wooden croquet balls? a. The equilibrium price will increase, but the effect on equilibrium quantity is uncertain b. The equilibrium price will decrease, but the effect on equilibrium quantity is uncertain c. Both equilibrium price and equilibrium quantity will increase d. The equilibrium quantity will increase, but the effect on equilibrium price is uncertain e. The equilibrium quantity will decrease, but the effect on equilibrium price is uncertain

d. The equilibrium quantity will increase, but the effect on equilibrium price is uncertain

Total consumer surplus is measured by the area _____ and _____ the price. a. above the supply curve; below b. below the supply curve; above c. below the quantity demanded curve; above d. below the demand curve; above

d. below the demand curve; above

If the price of a good's complement rises, _____ for the good whose price did not change will decrease. a. profit b. supply c. advertising d. demand

d. demand

Once you graduate from college, get a good job, and experience a rise in income, you will choose to buy fewer ______ goods, such as______. a. normal; Ramen noodles b. normal; restaurant meals c. inferior; restaurant meals d. inferior; Ramen noodles

d. inferior; Ramen noodles

Consumer surplus is the difference between the _____ the consumer is willing to pay for a good and the market price. a. minimum price b. supplier's cost c. supplier's profit d. maximum price

d. maximum price

If quantity demanded falls by 100,000 when price rises by 2 cents, we know that a. demand is elastic. b. demand is inelastic. c. demand is unit elastic. d. there is not enough information to calculate elasticity.

d. there is not enough information to calculate elasticity.

which of the following is likely to have the most price inelastic demand? a. mint flavored toothpaste b. colgate mint toothpaste. c. a generic mint toothpaste. d. toothpaste

d. toothpaste

At the intersection of the supply curve and the demand curve a.the quantity supplied equals the quantity demanded. b.no buyer who is willing to pay the market price goes without. c.no seller willing to sell at the market price is unable to do so. d.All of the above.

d.All of the above.

Suppose Clemson passes a law that forbids the construction of new houses within city limits. We would expect a.the price of existing houses to rise. b.the price of houses surrounding Clemson to rise. c.more building to occur in the area surrounding Clemson. d.All of the above.

d.All of the above.

The demand curve shows _______ and the supply curve shows ______. a.how much potential buyers value the good; the willingness of potential sellers to sell the good. b.the marginal benefit of the good to demanders; the marginal cost of the good to suppliers. c.the quantity that will be bought at each price; the quantity that will be sold at each price. d.All of the above.

d.All of the above.

Which of the following would not be expected to reduce the demand (shift the demand curve) for peanut butter? a.An increase in the price of jelly b.A decrease in the price of tuna (a substitute) c.The discovery that peanut butter causes cancer d.An increase in the price of peanut butter e.All would reduce the demand for peanut butter

d.An increase in the price of peanut butter

Why does quantity demanded fall as price rises? a.Because supply decreases. b.Because demand decreases. c.Because BOTH supply and demand decrease. d.Because people switch to substitutes.

d.Because people switch to substitutes.

If the supply of tea increases, what would we expect to happen in the market for coffee (a substitute)? a.The price to rise and quantity to fall. b.The price to fall and quantity to rise. c.Both price and quantity to rise. d.Both price and quantity to fall. e.Price to fall, but the effect on quantity to be uncertain.

d.Both price and quantity to fall.

If the price of tickets to Chicago Bears games rises by 10% and the quantity demanded rises by 8%, we can conclude that demand for Bears tickets a.is elastic b.is inelastic c.is unit elastic d.has increased e.has decreased

d.has increased

"Elasticity" measures the relationship between a.supply and demand. b.quantity supplied and quantity demanded. c.supply and closeness of substitutes. d.price and quantity. e.none of the above.

d.price and quantity.

If we raise price by 10 cents and quantity demanded falls by 10,000 units, we would conclude that a.demand is elastic. b.demand is inelastic. c.demand is unit elastic. d.there is not enough information to determine whether demand is elastic or not.

d.there is not enough information to determine whether demand is elastic or not.

The economic value destroyed by a price control is called

deadweight loss.

what does it mean if supply shifts to the left?

decrease in supply

The discovery of mad cow disease in the country's cattle herds would likely

decrease the demand for beef and increase the demand for chicken.

An increase in the price of a good would

decrease the quantity demanded for the good.

the price paid by buyers in a market will decrease if the government..

decreases a binding price floor in that market.

When the price of a complement for good X rises, the demand for good X

decreases.

When the price of bagels decreases, the demand for English muffins

decreases.

Total revenue decreases if price __________ and demand is ____________.

decreases; inelastic

One winter recently, the price of a cruise increased by 10 percent and the quantity demanded decreased by 15 percent. Use the total revenue test to determine whether the demand for a cruise is elastic or inelastic. Total revenue ______ because the percentage increase in the price is ______ than the percentage decrease in the quantity demanded.

decreases; less

Each point on a ________ curve shows the willingness of consumers to purchase a product at different prices.

demand

a tax on buyers will shift the..

demand curve and downward by the amount of the tax.

The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the

demand curve for imported champagne is vertical

The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the

demand curve for imported champagne is vertical.

When economists say the demand for a product has increased, they mean the

demand curve has shifted to the right

suppose there is currently a tax of $50 per ticket on airline ticket. buyers of airline tickets are required to pay the tax to the government. if the tax is reduced from $50 per ticket to $20 per ticket, then the..

demand curve will shift upward by $30, and the price paid by buyers will decrease by less than $30.

An increase in the price of a good normally increases the

demand for its substitutes

the discovery of a new hybrid wheat would increase the supply of wheat. as a result, wheat farms would realize an increase in total revenue if the..

demand for wheat is elastic.

If the population of a market area increases, all other factors being equal,

demand in the market will increase.

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then

demand is elastic

When the price for a loaf of bread increases from $1 to $1.80 and the quantity demanded decreases from 120 to 40 units,

demand is elastic.

what causes a demand SHIFT?

demand shift is caused by non-price factors (income, preference, ect.) or by changes in the price of OTHER goods

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week:

demand will become less price elastic

how do taste and preference affect demand?

depending on seasonal changes, advertising, new information. i.e. hot chocolate sales are up in the winter, if you find out your fav food causes cancer demand for that good will decrease

tax incidence

depends on the elasticities of supply and demand.

When two variables move in the same way, their relationship is:

direct.

what kind of relationship is there between the price of a substitute and the demand for a given good?

direct. if the price of a good increases the demand for the substitute will increase

what kind of relationship do income and demand for normal goods have?

direct. income increase will cause demand shift to the right (outward), decrease in income will cause demand to shift left (inward)

The price elasticity of demand is calculated by

dividing the percentage change in quantity demanded by the percentage change in price.

The cap-and-trade approach is sometimes opposed by environmentalists because they?

do not compensate victims of pollution

a $2 tax per gallon of paint placed on the buyers of pain will shift the demand curve..

downward by exactly $2.

What type of pressure will a surplus put on the market?

downward pressure

If price is raised by 10 dollars and quantity falls by 40 percent, the elasticity of demand a. equals 2. b. equals 10 c. equals 20 d. is greater than 1. e. can not be determined without more information.

e. can not be determined without more information.

Which of the following will increase the market price of chocolate eclairs? a.The discovery that chocolate causes cancer. b.A much larger than expected chocolate crop. c.A fall in the price of cupcakes (a substitute). d.A rise in the price of milk (a complement). e.None of the above.

e.None of the above.

If a 25% increase in the price of skateboards reduces the quantity demanded by 500, then demand for skateboards a.has increased. b.has decreased. c.is elastic. d.is inelastic. e.is downward sloping, but there is not enough information to calculate the elasticity

e.is downward sloping, but there is not enough information to calculate the elasticity

The quantity supplied will increase with an increase in price only if supply is not a.elastic b.inelastic c.unit elastic d.perfectly elastic e.perfectly inelastic.

e.perfectly inelastic.

A time-series graph is used frequently in?

econometrics

The way that markets adjust to change is an example of?

economic coordination through spontaneous order

An outward shift of a nation's production possibilities frontier represents

economic growth

when trade barriers between two nations, such as quotas and tariffs, are removed:

economic wealth will increase for both nations ??

a tax imposed on the sellers of a good will lower the..

effective price received by sellers and lower the equilibrium quantity.

If oranges and clementines are considered close substitutes, what would the demand for oranges be considered?

elastic

If raising the cigarette tax from 10 cents per pack to 20 cents per pack left cigarette tax revenues unchanged, it could be concluded that the price elasticity of demand for cigarettes was?

elastic

Sally has a pizza restaurant and sells 30 pizzas for $5 each. Jim has a pizza restaurant around the corner from Sally, and he sells 30 pizzas for $5 each. If Sally and Jim both lower their price to $3, Sally's customers will buy 60 pizzas, and Jim's customers will buy 40 pizzas. The demand for Sally's pizzas is more __________ than the demand for Jim's pizzas.

elastic

The table gives the demand schedule for peanuts. When the price of peanuts falls from $1.20 to $0.80 a packet, what is the change in total revenue? Over the price range of $0.80 and $1.20, the demand for peanuts is ______.

elastic

When a good has close substitutes, the demand for it tends to be what?

elastic

When the price demanded changes by a greater percentage than price, so that a price decrease causes total revenue to increase, what is demand considered?

elastic

holding all other factors constant, if decreasing the price of a good leads to an increase in total revenue, then the demand for the good must be..

elastic

China is the world's fastest-growing market for "vanity" spending China's market for the consumption of goods aimed at enhancing one's appearance or status grew an average of 15.6 percent a year for the past five years. Given the information that incomes grew at about 7 percent a year, is the demand for "vanity" goods in China income elastic or income inelastic? Explain. The demand for "vanity" goods in China is income _______.

elastic because the percentage change in the quantity demanded of "vanity" goods exceeds the percentage change in income

Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be

elastic for price increases that reduce quantity demanded from 4 units to 3 units.

the deadweight loss from a $3 tax will big largest in a market with..

elastic supply and elastic demand.

A baker sells 30 wedding cakes for the price $200 each. If the baker's price elasticity of demand is greater than 1, the demand for the wedding cakes is said to be __________, and total revenue will___________ with a price increase.

elastic; decrease

The Clean Air Act, after amendments in the 1990s, uses what to control acid rain?

emission charges

The payroll tax is a tax imposed on ________ that is used to fund Social Security and Medicare.

employers and workers

if you were a government official who wanted to raise the equilibrium price of milk, which of the following actions could you take and expect to achieve your goal?

encourage farmers to produce less milk

Which of the following is sometimes considered the fourth factor of production?

entrepreneurship

Price elasticity of demand is not _______.

equal to the slope of the demand curve

It is possible to have an elasticity value of one at?

every point along a demand line

when the government places a tax on a product, the cost of the tax to buyers and sellers..

exceeds the revenue raised form the tax by the government.

A rent control below the equilibrium price will cause

excess demand.

No economy uses one means of coordination to?

exclusion of all others

The determinants of supply are

factors that influence the quantity of a product that producers choose to put on the market.

suppose the cross- price elasticity of demand between hot dogs and mustard is -2.00. this implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to..

fall by 40 percent.

Almonds galore! The quantity of almonds harvested in 2008-2009 is expected to increase by 22 percent, while total receipts of growers are expected to increase by 17 percent. Is the price of almonds expected to rise or fall? Did a change in the supply of or demand for almonds bring about this expected change in the price? The price of almonds is expected to ______. This expected change in the price comes about by ______.

fall; an increase in supply

A change in supply is the same as a change in quantity supplied.

false

A shift in the demand curve is caused by a change in one of the variables that affects the demand curve and is called a change in the quantity demanded.

false

Assume that jelly beans and candy bars are substitute goods. If the price of jelly beans increases, the demand curve for jelly beans will shift inward.

false

Changes in the input prices or technology are represented by a movement along the supply curve and are called changes in quantity supplied.

false

Economists may favor price controls if the controls improve equity.

false

Economists often use the slope of a demand curve rather than elasticity to measure a consumer's responsiveness to changes in price.

false

Elasticity is the percentage change in price that results from a percentage change in quantity demanded.

false

If technological advances are made in an industry, the market supply curve will shift inward.

false

If the demand for steak falls when a consumer's income rises, then there is evidence that steak is a normal good.

false

If the government imposes a $2 tax on the sellers of a product, the supply curve shifts inward parallel to itself and intersects the demand curve at a lower price and higher quantity.

false

If the market price of hamburgers increases, the supply curve shifts outward.

false

In analyzing a supply function and then drawing a supply curve from it, you hold the price of a good constant but change the values of the other variables.

false

Minimum-wage laws specify the highest wage that employers may pay workers.

false

Price controls benefit markets because they help those with low incomes.

false

Price inelasticity means that bad weather may shift the supply curve for a commodity inward and thus decrease farm income.

false

The first step in a three-step process for analyzing the market change is to determine how the change will affect the demand curve.

false

The law of supply states that, when the price of a good rises, the quantity supplied of the good falls.

false

The supply of coal is fixed because there is only a finite amount in the ground that can be mined.

false

When excess supply exists in any economic market, the market price will rise until the excess supply is eliminated.

false

One of the unintended effects of set-aside programs is that

farm production may not fall.

When there is excess supply in the corn market, the bidding mechanism pushes down the price of corn. All of the following will occur except

fewer buyers will enter the market.

Given a situation of elastic demand, a prohibition will have greater intended consequences and?

fewer unintended consequences

The ratio of the change in the y-value compared to the change in the x-value between two points refers to what?

for a straight line, the slope

Which of the following is not part of the scientific method, as applied to economics problems?

formulate an irrefutable hypothesis

According to the graph if the price of bread is $1.50 per loaf, the producer will supply ________ loaves of bread.

four

Trade between countries that is without restrictions is called

free trade

which of the following statements is true?

free trade benefits a country when it exports but harms it when it imports.

Most demand curves are relatively elastic in the upper-left portion because the original price:

from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small

A given supply curve is based on?

given technology

what are inferior games?

goods in which demand falls as income rises. we buy more normal goods when there is an increase in income i.e. ramen, used cars, mac and cheese

what are complements?

goods that are consumed together i.e. hotdogs and buns, peanut butter and jelly, burger and fries

what are substitutes?

goods that can be used in place of one another i.e. pepsi and coke, adidas and nike, butter and margarine

what are normal goods?

goods where demand increases as income rises. most goods are normal goods

milk has an inelastic demand, and beef has an elastic demand. suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.

greater in the milk market than in the beef market.

The larger the positive cross elasticity coefficient of demand between products X and Y, the:

greater their substitutability.

Given a situation of inelastic demand, a prohibition will induce fewer intended consequence and?

greater unintended consequences

The law of diminishing returns implies that the marginal physical product curve must?

have a negative slope for at least part of its length

If a product's supply curve shifts outward, the new equilibrium quantity will be __________, and the new equilibrium price will be __________.

higher; lower

ceteris paribus is a key phrase in economics. it means:

hold all variables constant

The circular flow of economic activity can be summed up as:

households earn money by selling their factors of production to firms in the factor market and use that money to buy goods and services from firms in the product market

If the price of bread falls from $3 per loaf to $1.50 per loaf,

households will demand a different quantity of bread.

Elasticity is?

how sensitive buyers are to prices

The production possibilities frontier model shows that

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

when is there a shift in supply?

if some other factor than price changes, the entire supply curve will move

A positively sloped indifference curve might be possible in which of the following cases?

if the marginal utility of one of the goods diminished so far that it actually became negative

how do future expectations for price affect demand today?

if the price is expected to increase in the future, the demand today will increase, but if the price is expected to decrease in the future demand today will decrease because people are waiting to purchase later on in the future

According to the Coase theorem, private negotiation will lead to efficient resolution of pollution problems

if there are no transaction costs

which of the following statements is correct?

if you see a nation producing at a point on its PPF, its economy is using its resources efficiently

A tariff is a tax imposed by a government on

imports

Goods and services bought domestically but produced in other countries are referred to as

imports

In which statement(s) are "demand" and "quantity demanded" used correctly? (I) "An increase in the price of coffee will reduce the quantity demanded of coffee." (II) "An increase in the price of coffee will reduce the demand for cream used in coffee."

in both statements I and II

In which statement(s) are "supply" and "quantity supplied" used correctly? (I) "An increase in the price of computers will increase the quantity supplied of computers." (II) "A technological advance that lowers the cost of producing computers will increase the supply of computers."

in both statements I and II

Other things being equal, we expect that a given change in price will have a greater effect on the quantity demanded?

in the long run than in the short run

Which of the following would tend to reduce measured poverty rates?

including the value of in-kind transfers

Suppose that a 2% increase in income in the economy decreases the quantity of gadgets demanded by 1% at every possible price. This implies that

income elasticity is negative and gadgets are an inferior good

what is held constant when discussing demand?

income, taste/preference, prices of other goods

one of the reasons Chris chose life guarding is that he had already completed the certification course necessary for the job. "Since I have the training," he said, "I really should use it." This reasoning is:

incorrect because the cost of taking the course is a sunk cost

Assume there is an increase in the demand for hand calculators. The subsequent:

increase in price will be greater the greater the inelasticity of supply.

what does it mean if the supply shifts to the right?

increase in supply

ceteris paribus, which of the following would cause a decrease in the demand for film

increase in the price of cameras

Welfare reform during the 1990s was designed to?

increase incentives to work among welfare recipients

If the pretzel baker expects that pretzel prices will fall at the end of the month, his firm will

increase its supply at the current price.

If people expect the price of coffee to rise next month, the demand for coffee will

increase now

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:

increase the quantity demanded by about 25 percent.

As the price of apples increases, apple growers will

increase the quantity of apples supplied.

If a bread-baking firm improves its technology by using a new machine that speeds the baking process, the technological improvement will

increase the supply of bread.

Suppose legalizationand subsequent regulationof heroin and cocaine reduces their prices by 50%. Estimates suggest the total quantity of heroin and cocaine demanded would rise by 83% and 42%, respectively. Consequently, legalization would:

increase total expenditures on heroine and decrease total expenditures on cocaine

suppose consumer income increases. if grass seed is a normal good, the equilibrium price of grass seed will..

increase, and producer surplus in the industry will increase.

For most goods, if a consumer's income increases, his / her demand for the goods will

increase.

If a producer lowers a product's price and the quantity demanded is proportionally greater than the price change, the total revenue would

increase.

if the cost of producing sofas decreases, then consumer surplus in the sofa market will..

increase.

If the elasticity of demand is .33 and price increases, total revenue

increases.

When income decreases, the demand for inferior goods

increases.

When the price of a substitute for good X rises, the demand for good X

increases.

Sally has a pizza restaurant and sells 30 pizzas for $5 each. Jim has a pizza restaurant around the corner from Sally, and he sells 30 pizzas for $5 each. If Sally and Jim each lower their price to $3, Sally's customers will buy 60 pizzas, and Jim's customers will buy 40 pizzas. Sally's total revenue __________, while Jim's total revenue __________.

increases; decreases

A production possibilities frontier with a bowed outward shape indicates

increasing opportunity costs as more and more of one good is produced.

The demand schedule for a good

indicates the quantities of the good that people will buy at various prices.

Interior points on the production possibility frontier are?

inefficient

Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be:

inelastic for price declines that increase quantity demanded from 6 units to 7 units.

A baker sells 30 wedding cakes at $200 each. If the cakes' price elasticity of demand is less than 1, the demand for the wedding cakes is said to be

inelastic.

A drug addict's demand curve for cocaine is likely to be

inelastic.

If the percentage change in quantity demanded is smaller than the percentage change in price, then you can say that demand is

inelastic.

holding all other factors constant, if increasing the price of a good leads to an increase in total revenue, the demand for the good must be..

inelastic.

Refer to the above information. Over the 5 price range, demand is

inelsatic

All markets do not have to operate with?

inventories

Markets for services operate without?

inventories

What is one of the first signs of a surplus?

inventories grow at unplanned rates

the negative slope of the demand curve reflects the:

inverse relationship between price and quantity

what kind of relationship is there between the price of a complement and the demand for a given good?

inverse. if the price of a good increases, then the demand for that good's complement will decrease

what kind of relationship do input prices and supply have?

inverse. if the price of input is greater than the cost of the actual good, less goods will be produced/supplied (there would be less profit)

what kind of relationship do income and demand for inferior goods have?

inverse. income increase will cause demand to shift left (inward). decrease in income will cause demand to shift right (outward)

When the price of a good increased by 8 percent, the quantity demanded of it decreased 4 percent. Most likely, this good ______ and ______.

is a necessity; has poor substitutes

Economic surplus

is equal to the sum of consumer surplus and producer surplus.

a tax burden falls more heavily on the side of the market that..

is more inelastic.

Refer to the above information and assume the stadium capacity is 5,000. The supply of seats for the game:

is perfectly inelastic.

Protectionism

is the use of trade barriers to protect domestic firms from foreign competition.

What is a major advantage claimed for the cap-and-trade approach, compared to the command and control approach?

it ensures that pollution will be cut back the most at the sources where abatement costs are lowest

If society decides it wants more of one good and all resources are fully utilized, then

it has to give up some of another good and incur some opportunity costs

What can be made about a downward-sloping, straight line demand curve?

it is more elastic at the top than it is at the bottom

What is true about a supply curve that is a straight line passing through the origin?

it must be unit elastic

the government of Labouria is considering increasing the tax on cheese from $3/pound to $4/pound. what will this do to the revenues from this tax?

it will definitely decrease tax revenue if demand for cheese is elastic

What is true of a negative income tax program?

it would lower net marginal tax rates for the poor b y comparison with programs like food stamps

In economics, whenever price is a variable:

it's always on the vertical axis of a graph.

what is equilibrium price?

it's the price that "clears the market" price at which Qd=Qs the price where demand curve intersects with the supply curve there is no surplus or shortage

If a firm decided it could save on total cost by unplugging itself from the local electric utility and buying its own generating equipment, we could assume that?

its fixed costs would rise and its variable costs would fall

What does Ceteris Paribus mean?

keeping all other things constant

The human resource involved in the production of any good is called:

labor.

The factors of production fall into the following categories:

land, labor, capital, and entrepreneurship.

In a city with rent-controlled apartments, all of the following are true except

landlords have an incentive to rent more apartments than they would without rent control

The demand for autos is likely to be:

less elastic than the demand for Honda Accords.

Read Eye on the Price of Gasoline, and then explain why the demand for gasoline is more inelastic in the short run than in the long run. Which is likely to be more inelastic, the demand for premium gasoline or the demand for all grades of gasoline? The demand for premium gasoline is likely to be _______ the demand for all grades of gasoline.

less inelastic than

Over the 8 price range, the elasticity coefficient of supply is:

less than 1.

According to the principle of diminishing marginal utility, if consumption of a third slice of bread with a meal yields 10 utils, consumption of a sixth slice of bread must give?

less than 10 utils

Assume that the price of product Y decreases by 5% and the quantity supplied decreases by 2%. The coefficient of price elasticity of supply for good Y is

less than one and therefore supply is inelastic

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

linear

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

linear

the price elasticity of demand changes as we move along a..

linear, downward- sloping demand curve.

Demand tends to be more elastic in the?

long-term view

suppose researchers at the university of wisconsin discover a new vitamin that increases the milk production of dairy cows, if the demand for milk is relatively inelastic, the discovery will..

lower both the price and total revenues.

a country has a comparative advantage in a product if the world price is..

lower than the countries domestic price without trade.

suppose the government imposes a 25 cent tax on the buyers of incandscent light bulbs, which of the following is not correct?

lower the equilibrium price by 25 cents.

A tariff

makes domestic consumers worse off.

Abstract graphs are often used to represent theories that apply to?

many cases

The demand curve represents?

many customer's demand for a good

The cap-and-trade system controls pollution through

marketable waste-discharge permits

The production possibilities frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources.

maximum attainable

suppose televisions are a normal good and buyers of television experience a decrease in income, as a result, consumer surplus in the television market..

may increase, decrease, or remain unchanged.

The slope of a production possibilities frontier

measures the opportunity cost of producing one more unit of a good.

The study of the factors determining the price of gasoline relative to the price of other fuels would be primarily a concern of?

microeconomics

Since the 1960s, average federal tax rates have increased for which groups?

middle-income working households

What do determinants of the elasticity of supply include?

mobility of the factors of production and time

in analyzing the gains and losses from international trade, to say that moldova is a small country is to say that.

moldova is a price taker.

As a good becomes more narrowly defined, what does the demand for the good tend to become?

more elastic

The demand for Honda Civics is

more elastic than the demand for automobiles in general and probably is elastic.

A study shows that demand for cigarettes has a price elasticity of about 0.2, whereas the supply of cigarettes has a price elasticity of 1.3. We can conclude that the economic burden of cigarette taxes falls

more heavily on smokers than on producers

According to the law of supply,

more of a good will be offered by suppliers as the price rises

Restricting imports on foreign oil will lead to everything except:

more purchases of oil by domestic consumers ??

when a tax is placed on the buyers of a product, a result is that buyers effectively pay

more than before the tax, and sellers effectively receive less than before the tax.

The income elasticity of demand for haircuts is 1.5, and the income elasticity of demand for food is 0.14. You take a weekend job, and the income you have to spend on food and haircuts doubles. If the prices of food and haircuts remain the same, you will _______.

more than double your expenditure on haircuts and less than double your expenditure on food

if the equilibrium wage in the labor market is $8, but the government imposes a minimum wage of $10, there will be:

more unemployment because employers will want to hire fewer people

Which is true of a majority of families who are officially measured as poor in a given month?

most experience poverty for short spells alternating with spells of higher income

how will we move if there is an increase in quantity demanded?

move down and to the right to consume more

how will we move if there is a decrease in quantity demanded?

move up and left along the demand curve

A change in the price of a good causes a ---- the demand curve

movement along

what is change in quantity supplied?

movement along a single supply curve

what causes movement ALONG the demand curve?

movement along the curve is caused by a change int he price of the good

if a tax is levied on buyers of a product, then there will be an..

movement down and to the left along the supply curve.

How is change in the quantity demanded represented graphically?

moving from one point to another point on the same demand line

To affect the market outcome, a price ceiling

must be set below the equilibrium price.

If the opportunity cost of production for two goods is different between two countries, then

mutually beneficial trade is possible.

What is the income elasticity of demand for an inferior good?

negative

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:

negative and therefore these goods are complements

We would expect the cross elasticity of demand between dress shirts and ties to be

negative, indicating complementary goods.

The price elasticity of demand is dependent upon

neither the units used to measure the price nor the units used to measure the quantity.

A price floor that is less than the equilibrium price causes

no change in the market.

According to the graph, if the government imposes a minimunm wage of $4 per hour in this labor market, there will be

no effect on this labor market.

when a tax is imposed on a good for which both demand and supply are very elastic..

none of the above is correct further information would be needed to determine how the burden of the tax is distributed between buyers and sellers.

What is a good for which an increase in consumer income results in an increase in demand called?

normal good

In 1987, during a series of baseball games, the Reds beat the Astros, the Astros beat the Giants, and the Giants beat the Reds. We conclude that the relationship denoted by the word "beat" is

not subject to transitivity

A graph is able to represent qualitative attributes and relationships without what?

numbers

Points on graphs represent pairs of?

numbers

society's production possibilities curve bows out because:

of increasing opportunity costs

What number represents unit elastic demand?

one

One winter recently, the price of a cruise increased by 10 percent and the quantity demanded decreased by 15 percent. Use the total revenue test to determine whether the demand for a cruise is elastic or inelastic. Because total revenue and the price change in _________, the demand for a cruise is ______.

opposite directions; elastic

people trade because:

people expect to be better off by the trading

Read Eye on the Price of Gasoline, and then explain why the demand for gasoline is more inelastic in the short run than in the long run. Which is likely to be more inelastic, the demand for premium gasoline or the demand for all grades of gasoline? The demand for gasoline is more inelastic in the short run than in the long run because in the short run _______.

people don't quickly change from gas-guzzling cars to fuel-efficient cars when the price of gasoline rises

economists compute the price elasticity of demand as the..

percent change in quantity demanded divided by the percentage change in price.

A horizontal demand curve is described as?

perfectly elastic

people pursuing their own self-interest are:

perhaps selfish, but perhaps not, depending on their values and point of view

Suppose a soybean farmer expects a lower price for soybeans at harvest time than the market price at the time of planting. This farmer is likely to

plant fewer acres in soybeans.

Suppose a soybean farmer expects a higher price for soybeans at harvest time than the market price at the time of planting. This farmer is likely to

plant more acres in soybeans to take advantage of the expected higher price.

Assume that a 4 percent increase in income in the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is:

positive and therefore X is a normal good.

We would expect the cross elasticity of demand between Pepsi and Coke to be

positive, indicating substitute goods.

The relationship between price and quantity supplied is

positive.

Consumption goods satisfy? and investment good satisfy?

present needs; future needs

in a competitive market free of government regulations..

price adjusts until quantity demanded equals quantity supplied.

Shortages result from

price controls below equilibrium.

If a local restaurant decides to lower the cost of its "lunch special" to increase its total revenue, it must believe that the demand for lunch specials is

price elastic

a legal minimum on the price at which a good can be sold is called a..

price floor.

if demand and supply both increase

price may either rise or fall, depending on which shift is larger

When economists say the quantity demanded of a product has decreased, they mean the

price of the product has risen, and consequently, consumers are buying less of it.

In which of the following instances will total revenue decline?

price rises and demand is elastic

Suppose there is a surplus in the bread market. You could predict that

price will decrease, quantity demanded will rise, and quantity supplied will fall.

how are prices determined in a market-based economy?

prices are determined by the forces of supply and demand demand: buyers and consumers supply: sellers, producers of the good

when a country that imports a particular good imposes a tariff on that good..

producer surplus increases and the total surplus decreases in the market for that good.

the benefit to sellers of participating in a market is measured by the..

producer surplus.

zelzar has decided to end its policy of not trading with the rest of the world. when it ends it trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. which groups in zelzar are better off as a result of the new free-trade policy?

producers of steel and comsumers of incense.

The reason that economists prefer the midpoint method for calculating elasticity is that it

produces the same answer regardless of the direction of the price change.

In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. One reasons for this is

production of most goods involves increasing opportunity costs.

In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. One reasons for this is

production of most goods involves increasing opportunity costs.

How do consumers respond to surpluses?

purchasing more of the good

When there is excess demand for sugar in the market, the bidding mechanism will

push up the price of sugar.

Along a given supply curve for any product,

quantity supplied increases as price increases.

If the demand for bicycles increases,

quantity supplied will increase.

A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called

quota

for a good that is taxed, the area on the relevant supply and demand graph that represents governments tax revenue is a..

rectangle.

The main purpose of most tariffs and quotas is to

reduce the foreign competition that domestic firms face.

The coefficient of price elasticity is 0.2. Demand is thus

relatively inelastic

The demand for a necessity whose cost is a small component of one's total income is:

relatively inelastic

Assume that between two points on a demand curve, the elasticity is 1. A decrease in price from from one point to the other means that total revenue

remains unchanged.

In the factor market, resource owners receive:

rent for their land, wages for their labor, and interest for their capital.

The basic assumption in economics is that _____ are limited and _____ are unlimited.

resources, wants

Elasticity is also called

responsiveness.

Firms use the price elasticity of demand to determine how a change in price will affect

revenues.

a technological breakthrough lowers the cost of manufacturing VCRs. as a result, the market changes to a new equilibrium because of a (an):

rightward shift in the supply curve for VCRs

The opportunity cost of supplying more of a particular good

rises as the quantity supplied increases.

An assumption is something that:

scientists take for granted is true about the world

If a producer of bread thinks that the price of bread will fall next week, the producer will

sell all the bread this week if possible.

If a pretzel firm expects the price of pretzels to rise next week, it will

sell fewer pretzels this week and save the supply for the price increase

which of the following events would increase producer surplus?

sellers costs stay the same and the price of the good increases.

which of the following would a government operating in a laissez-faire economy not do?

set prices

Refer to the above information and assume the stadium capacity is 5,000. If the Mudhens' management wanted a full house for the game, it would

set ticket prices at $5

According to the supply curve, if the price of bread is $3.00 per loaf, the producer will supply __________ loaves of bread.

seven

A ---- the demand curve means that the quantities will be different at all prices

shift of

If you expect the price of ice cream to increase next week, your demand curve for ice cream will

shift outward. You will buy more of the good at the lower price today.

Changes in the prices of other goods that producers could make using the same factors of production could also?

shift the supply curve

assuming compact discs and cassettes are substitute goods, a decrease in the price of cassettes will cause the demand curve for compact discs to:

shift to the left as consumers switch from buying discs to cassettes

Economic decline (negative growth) is represented on a production possibilities frontier model by the production possibility frontier

shifting inward

In the economic sense, almost everything is scarce. ________ of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

shortage

The demand curve

shows the relationship between the price of a good and the quantity that the consumer is willing and able to purchase in a given period of time, holding all other factors that influence consumer behavior constant.

A line that rises as it moves from left to right has a:

slope greater than 0.

The slope of a curve is defined as the?

slope of a straight line drawn tangent to the curve at a particular point

deadweight lost

social welfare loss from a market distortion (price control, tax, etc)

when a binding price ceiling is imposed on a market to benefit buyers..

some buyers benefit, and some buyers are harmed.

The command-and-control approach to pollution control can best be described by what?

specific pollution control methods are required

An excellent harvest of citrus fruit has caused the price of oranges to fall by 10%. Consumers buy 5% more oranges. The price decrease has caused consumers to

spend less on oranges.

If an increase in the price of one good results in an increase in the demand for another good, what are these two goods considered?

substitute goods

cross-elasticity is a way of measuring the relationships between?

substitutes and complements

Two products that serve similar purposes for a consumer would be referred to as

substitutes.

The more elastic the demand for the product, the more?

successful a particular policy concerning that product will be

what will happen if the number of suppliers increases/decreases?

suppliers increase: supply curve shifts right suppliers decrease: supply curve shifts left

A ________ curve shows the marginal cost of producing one more unit of a good or service.

supply

When economists say the supply of a product has increased, they mean the

supply curve has shifted to the right.

Suppose that New York does not recognize the physician licensing laws from other states. This non-recognition shifts New York's

supply of medical services to the left.

A decrease in the price of leather used to make shoes would cause the

supply of shoes to increase.

what is surplus?

surplus is when the quantity supplied is greater than the quantity demanded. occurs when prices are above p*

a major difference between tariffs and import quotas is that..

tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to import.

The actual division of the burden of a tax between buyers and sellers in a market is called

tax incidence

What might be an example of a queue of sellers?

taxi drivers waiting for passengers outside a train station

assume the nation of teeveeland does not trade with the rest of the world. by comparing the world price of televisions to the price of televisions in teeveeland, we can determine whether..

teeveeland has a comparative advantage in producing televisions.

If Sue demands six packs of gum at seventy-five cents each and John demands four packs of gum at seventy-five cents, the market quantity demanded at that price is

ten.

If the income elasticity of demand for intercity bus travel is -0.5, what would we expect, other things being equal?

that bus company revenues will rise when income fall

The law of demand states, all other things being equal,

that consumers will buy more of a good if the price falls.

Demand depends on the price of one good relative to?

that of other goods

A perfectly inelastic demand curve means?

that there is no change in quantity demanded regardless of how great the change in price

Where is the cap-and-trade approach used most extensively for carbon emissions as of 2008?

the European Union

NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries?

the United States, Canada and Mexico

In economic terms, how is demand defined?

the ability and willingness of buyers to purchase goods

In economic terms, how is supply defined?

the ability and willingness of sellers to provide goods for sale in a market

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer (one country can have absolute advantage in producing both goods, however, one country can have only one comparative advantage)

absolute advantage

the ability to produce a good using fewer inputs than another

Consumer surplus

the amount a buyer is willing to pay minus the price that the buyer actually pays. CS=WTP-price

producer surplus

the amount a seller is paid for a good minus the cost of providing it. PS=price-cost

What is quantity demanded?

the amount of a good or service that consumers with to purchase given a certain income, price, and time period

what is quantity supplied?

the amount of a good or service that producers are willing to produce given a certain price and time period

The total amount of producer surplus in a market is equal to

the area above the market supply curve and below the market price.

Demand is defined by

the behavior of consumers or households.

A scientist wants to test how a species of insect reacts to changes in its environment. She puts the insect in a container and leaves it outside overnight. Which is the dependent, rather than the independent, variable in this experiment?

the behavior of the insect in the container

One may spend too much time on an enjoyable game and not enough time reading because?

the benefits of the game are immediate and some of its costs are in the future

Excess demand for chocolate bars will cause all of the following except

the bidding mechanism to remain constant.

In the absence of a tax wedge,

the consumer surplus and producer surplus would be larger.

Consumer Surplus

the consumer's gain from exchange, or the difference between the maximum price a consumer is willing to pay for a certain quantity and the market price

A pretzel firm experiences a loss when several of its employees are hurt in an accident and are permanently disabled and can no longer work. This loss means that

the cost of production becomes higher and supply falls.

Economy forces many to shorten summer vacation plans Americans are taking fewer exotic holidays and are visiting local scenic places instead. The financial crisis has encouraged many to cut their holiday budgets. Are exotic holidays and local holidays substitutes? Explain your answer. Exotic holidays and local holidays are substitutes if ______.

the cross elasticity of demand is positive

The ratio of the percentage change in the quantity of a good demanded to a given percentage change in the price of some other good, holding all other things constant, is referred to as?

the cross-elasticity of demand

Exterior points on the production possibility frontier are not available with?

the current resources

how will tax affect the supply curve?

the curve will shift to the left. firms don't want to produce more if they are going to be taxed on each unit of good and lose money

how will subsides affect the supply curve?

the curve will shift to the right. firms are willing to supply more if the government is going to give them money for each unit of good produced

The market equilibrium price is the point at which?

the demand and supply curves intersect

What is best represented by a positively sloped curve?

the demand curve for cap-and-trade permits

Suppose that when your income increases from $28,000 to $30,000 per year, your purchases of X increase from 4 to 5 units because of that income increase. Thus:

the demand for X is elastic with respect to income.

suppose prices for new homes have risen, and sales of new homes have also risen. we can conclude that:

the demand for new homes has risen

If a household's income decreases,

the demand for normal goods will decrease, and the demand curve will shift inward.

Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus:

the demand for peanuts is inelastic.

If a price reduction reduces a firm's total revenue:

the demand for the product is inelastic in this price range

what is market demand?

the demand of all consumers in the marketplace for a particular good or service. it's the horizontal sum of all individuals at EACH price

The tax wedge can be identified as

the difference between the consumer's demand price and the seller's price.

Profit is

the difference between the cost of providing a service or good and the revenue earned by selling the service or good.

What does the phrase "shift in a curve" mean?

the effect of a change in a variable that does not appear on one of the coordinate axes of the diagram

What is the effect of a prohibition on the supply curve?

the effect of a prohibition on the supply curve shifts the supply curve to the left

The size of the rebound effect directly depends on?

the elasticity of demand

When an economist analyzes "market demand" in a particular market, the economist is referring to

the entire demand curve.

A drought that destroys half of the corn crops in the Midwest would cause

the equilbrium price of corn to be higher and the equilibrium quantity to be lower.

what is the demand curve?

the graphical relationship of the demand schedule. price on the vertical axis, quantity of the horizontal axis. the demand curve is downward sloping/ negative

The elasticity of demand for a product is likely to be greater:

the greater the amount of time over which buyers adjust to a price change

Households will buy more of a normal good at every price when

the household income increases

The force that Adam Smith felt drove any economic system was:

the invisible hand.

If a jeweler sees a fall in the price of gold and gold is an input good to the jeweler's products, with all other factors being equal we would expect

the jeweler to produce more jewelry at each possible price.

The biggest disadvantage is a command economy is:

the lack of incentive for individuals

What is the law of demand considered to be a universal law?

the law of demand is considered to be universal because of the substitution effect and the income effect

An economic system is defined as:

the laws and institutions through which a society allocates resources to produce goods and services.

A minimum wage law dictates

the lowest wage that firms may pay for labor.

Economic efficiency in a competitive market is achieved when

the marginal benefit equals the marginal cost from the last unit sold

The optimal quantity of pollution is found at the point where the marginal cost of pollution abatement curve crosses?

the marginal external cost curve

The total quantities of a product that all sellers, collectively, are willing and able to offer at alternative prices is

the market supply curve.

Consumer side Willingness-to-pay

the maximum amount that a buyer will pay for a good

Willingness to pay measures

the maximum price that a buyer is willing to pay for a good.

In a democracy, what voting groups is most likely to see their desired level of pollution control met?

the median voters

Demand will be more elastic

the more substitutes that are available.

Passing a law prohibiting production and sale of a good increases?

the opportunity cost for producers

If Canada has a comparative advantage relative to Mexico in the production of timber, then

the opportunity cost of production for timber is lower in Canada than in Mexico.

Suppose chocolate bars and jelly beans are substitutes for each other. If the price of jelly beans increases, then the new competitive equilibrium for chocolate bars occurs where

the original supply curve intercepts a new demand curve.

Unit elastic demand means that the percentage change in quantity equals?

the percentage change in price

The elasticity of supply of a good today is influenced by _______.

the possibility to store some of today's production for later sale

Joan is Christmas shopping. She has $25 to spend buying gifts for her cousin, her mother, and her father. What is properly described as the alternatives of her rational choice problem?

the possible gifts ties, chocolates, calendars, and so on

ABC company incurs a cost of 50 cents to produce a dozen of eggs, while XYZ company incurs a cost of 70 cents to produce a dozen eggs. which of the following price increases would cause both companies to experience an increase in producer surplus?

the price of a dozen eggs increases from 55 cents to 75 cents.

If there is an excess demand for burritos, we would expect that

the price of burritos will rise

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in:

the price of some other product.

what are input prices?

the price of the input resources needed to make a good/final product

Besides the price of substitutes and complements, other determinants of demand include

the price of the product, income, and consumers' tastes.

The degree of separation between price and opportunity cost is correlated with?

the price-elasticity of the good

A tax-distorted demand curve tells us

the prices that the consumer is willing to pay to the producer.

Producer Surplus

the producer's gain from exchange, of the difference between the market price and the minimum price at which a producer would be willing to sell a particular quantity

A supply curve is a collection of points on a graph illustrating the relationship between the quantity supplied for a particular product and

the product's price.

The relationship between two goods (i.e.., complementary, substitute, etc.) does not depend on?

the properties of the two goods

When the quantity demanded for a particular good exceeds the quantity supplied for that good,

the quantity demanded will decrease as the price increases.

suppose a price ceiling is set by the government in a market. which of the following will result?

the quantity demanded will exceed the quantity supplied

The law of demand defines a relationship between what two things?

the quantity of a good people are willing and able to buy and price

The law of demand indicates that

the quantity of a good that people will buy is inversely related to the price of the good.

suppose france imposes a tariff on wine of 3 euros per bottle. if government revenue from the tariff amounts to 30 million euros per year and if the quantity of wine supplied by french wine producers, with the tariff, in 8 million bottles per year, then we can conclude that?

the quantity of wine demanded by france, with the tariff, is 18 millions bottles per year

The elasticity of demand is sensitive to?

the range of prices and quantities

What is an example of normative economics?

the rate of inflation should be held below 6 percent regardless of what happens to unemployment

A demand schedule shows

the relationship between the price of a good and the quantity demanded of the good.

The price of the good times the quantity sold is equal to?

the revenue

When we talk about the slope of a line we mean:

the rise over the run

When we talk about the slope of a line we mean:

the rise over the run.

Factors that shift the market demand curves are

the same as for the individual demand curves.

Macroeconomics

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

Microeconomics

the study of how households and firms make decisions and how they interact in markets

When the price of a good rises, consumers will stop buying the more expensive goods and switch to substitutes. This behavior is explained by

the substitution effect.

Costs of production can cause a shift in?

the supply curve

If an excise tax is imposed on a producer,

the supply curve shifts higher, and a smaller quantity is demanded at the higher price

If the price for a main input for a particular product increases and all other factors are constant,

the supply curve will shift inward.

The price of old baseball cards rises rapidly with increases in demand because:

the supply of old baseball cards is inelastic.

The market supply curve for wheat depends on each of the following except

the tastes and preferences of wheat consumers.

which of the following was not a result of the luxury tax imposed by congress in 1990?

the tax was never repealed or even modified.

The marginal external cost of pollution means?

the total additional costs borne by all people for one more unit of pollution

what is change in demand?

the whole demand curve shifts left or right. caused by a change in non-price factors (income, preference ect) or changes in the price of other goods quantity demanded will change for ALL PRICES after a demand shift

Relational graphs provide a visual representation of?

theory

Generally, those people who advocate minimum-wage laws believe

there are some negative effects of the laws but the benefits outweigh the costs

what does it mean if there is a change along the demand curve?

there is a change in quantity demanded

When there is excess supply in a market,

there is downward pressure on the price.

one of the assumptions underlying the production possibilities curve (or PPF) for any given economy is that:

there is full employment of resources when the economy is on the curve

According to the Law of Demand, when the price of a good increases,

there is movement along the demand curve but it does not shift.

If equilibrium is achieved in a competitive market

there is no deadweight loss.

When there is excess demand in a market,

there is upward pressure on the price.

Refer to the above information and assume the stadium capacity is 5,000. If the Mudhens' management charges $7 per ticket:

there will be 1,000 empty seats.

what will happen if the population/ market size increases?

there will be a demand curve shift outward. more of each good will be demanded at all prices

If the price of inputs for making pizza increases,

there will be less pizza supplied because the costs are increasing.

what is change in quantity demanded?

this is movement along the demand curve. move on the demand curve from one point to another. this is caused by a change in the price of the good.

what does it mean if there is a demand SHIFT?

this means there is a change in demand

Suppose the market for automobiles is a national market. If personal income nationwide increases, then (other factors being equal) the market demand for automobiles is likely

to increase.

What is the intention of prohibition?

to reduce the quantity sold to zero

When the price of a good increased by 10 percent, the quantity demanded of it decreased 2 percent. An example of a good with such a demand is _______.

toothpaste

If the elasticity between two points on a demand curve is 3 and price increases,

total revenue decreases.

China and Russia are:

transitional economies

A demand function is a mathematical formula that specifies the relationship between the demand for a good or service and the variables that influence that demand.

true

A horizontal demand curve is more elastic than a vertical demand curve.

true

A movement along the demand curve for a particular good is a response to the change in price of a particular good.

true

A supply function is a mathematical representation of the quantity of a good that a firm is willing to supply the market profitably as a function of all the variables that influence the firm's decision.

true

A vertical demand curve means that any change in price will produce no change in the quantity demanded.

true

Assuming that hamburgers and mustard are complements, a decrease in the price of hamburgers would increase the demand for mustard.

true

Factors other than the price of a particular product will shift the supply curve.

true

For most goods or services, quantity demanded increases if supply increases.

true

Goods tend to have more elastic demand over longer time horizons.

true

If an excise tax is imposed on consumers, the market demand curve will shift inward.

true

If beer and pizza are complements, a decrease in the price of pizza would increase the demand for beer.

true

If sellers expect prices to rise in the future, prices today will rise because sellers might reduce current supply and wait for higher prices.

true

If the demand curve for a product is vertical, any tax increase on the product is paid for entirely by the consumer.

true

If there is a sudden shortage of oil in the United States, the large increase in price would not cause the quantity demanded to fall by a large percentage until a year or more after the shortage.

true

Luxuries usually have a more elastic demand than necessities.

true

The determinants of market demand include all determinants of individual demand, and, as well, the number of buyers in the market, since the individual demand functions of all of them must be summed to arrive at market demand.

true

The income effect says that when the price of a good increases, consumers buy less of the good because their purchasing power is shrinking in terms of that particular good.

true

The supply curve is a collection of points representing the quantity of a particular good that a producer is willing and able to offer for sale in a given period of time as a function of the price of the particular good.

true

To derive a market demand curve, add the quantity demanded by each individual in the market at each price and construct a new demand schedule.

true

To economists, the Latin phrase ceteris paribus means "all other variables held constant.

true

Substitutes

two goods for which a decrease in the price of one leads to a decrease in demand for the others

Complements

two goods for which a decrease in the price of one leads to an increase in the demand for the other

The points outside the production possibilities frontier are

unattainable

What are some of the most important ways of increasing production potential in the past?

uncovering new natural resources and population growth

Which of the following is considered an example of a labor market policy designed to reduce poverty?

unemployment compensation

Refer to the diagram. Suppose total revenue at price P3 is the same as at price P2. Then, over the price range from P2 to P3, demand is:

unit elastic

What is demand considered to be when the percentage change in quantity demanded equals the percent change in price?

unit elastic

Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be:

unit elastic for price increases that reduce quantity demanded from 5 units to 4 units.

The maker of a particular breakfast cereal found that increasing the price from $3.00 to $3.25 per box had no impact on total revenue, but increasing the price further to $3.50 reduced total revenue by 2%. Thus, the demand for the cereal is:

unit elastic over the range $3.00 to $3.25 and elastic over the range $3.25 to $3.50

jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of the apps, jeromes demand for apps is?

unit elastic.

The price of milk increases; total revenue to milk producers remains unchanged. Milk has a(n) _______________ demand.

unitary elastic

Markets coordinate output decisions by pushing

up price when there is a shortage.

a decrease in quantity demanded is given by a

upward movement to the left along the demand curve

What pressures will a shortage put on the market?

upward pressure

if a tax is levied on the sellers of a product, then there will be an

upward shift of the supply curve.

what does a supply curve look like?

upward sloping, direct relationship

This class encourages students to?

use sound theory and evidence in justifying one's arguments

a sellers opportunity cost measures the..

value of everything she must give up to produce a good.

consumer surplus is equal to the..

value to buyers- amount paid by buyers.

The fallacy of composition is committed when an investigator assumes that:

what one person does will be more or less true for everyone else

What is one key question to ask when studying a graph?

what point is the graph trying to make?

what happens when prices increase/ decrease

when price increases quantity supplied decreases, when price decreases quantity supplied increases

Inferior Good

when the increase in income decreases the demand for a good

Normal Good

when the increase in income increases the demand for a good

what is the first law of demand?

when the price of a good rises, we have a lower quantity demanded. and when the price falls there is a greater quantity demanded

When might the substitution effect play a role in the economy?

when the price of one good falls and the price of all other goods remain the same

When might the income effect play a role in the economy?

when the price of one good falls while incomes remain the same

When is a good considered an inferior good?

when the quantity demanded will go down with increased income of consumers

how does technological progress affect production and supply?

when there are technological advances it can lower cost of production. we can get the same output for lower costs. firms can produce more goods at the same price because of lower production costs and higher profits

at the equilibrium price of a good, the good will be sold by those sellers..

whose cost is less than price.

Suppose Amelia saw the first half of a play which she hated. She cannot resell or transfer the ticket. At intermission her decision to stay for the second half?

will not depend on how much the ticket cost

The income effect of an increase in wages will cause an employee to

work fewer hours.

The substitution effect of an increase in wages may cause a person to

work more hours.

Considering an illegal drug such as cocaine, a prohibition on its prohibition would do?

would have a small effect, as cocaine users create an inelastic demand for the good

The horizontal axis in a graph or plane typically measures the?

x-value

what ways can the demand curve move if it's not static?

you can move along the demand curve, or the entire curve itself can move left or right

What elasticity does a perfectly inelastic demand curve have?

zero

What is the slope for perfectly elastic demand?

zero

An advance in technology lowers the price of a laptop. If the demand for laptops is price inelastic, the number of laptop sold will ______ and total revenue will ______.

increase; fall

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Module 1: Sections 1.01-1.02