Econ 201 Exam

What is the price elasticity of a demand if price increases by 100% and quantity demanded decreases by 50%

0.5

Six determinants of supply:

1. Production technology 2. costs of resources 3. prices of other commodities 4. expectations 5. the number of sellers (producers) in the market 6. taxes and subsidies

If the price rises from $2 to $3, and the quantity demanded falls from 500 to 300 units, compute the price elasticity of demand using the midpoints formula:

1.25

The concepts of absolute and comparative advantage were developed by:

David Ricardo

Jason produces more jeans than Jonathan. Why would Jason want to allow Jasmine to produce the jeans although he knows he can produce more than she can at a faster rate?

Jasmine has a lower opportunity cost of producing the jean than Jason.

If two goods are substitutes and the price of one rises, then the demand for the other good will also rise.

True

A demand schedule is:

a list of prices and quantities demanded

Suppose that a major hurricane hits Florida, causing widespread damage to homes and businesses. If the legislature imposes price controls in order to keep reconstruction costs reasonable, which of the following is the most likely result?

a shortage of building materials

If Ben buys more coffee because his income increases, this is:

an increase in demand

A shift to the right of the demand curve would be caused by anything except:

an increase in income given that shoes are a normal good.

the basic proposition of the law of demand is that:

as the price of a good rises, less of it is demanded.

which of the following statements does not explain the inelastic demand for bread?

bread sales decline significantly in the short run as bread prices rise .

Economists develop stylized approaches to economic issues by:

building models that test their predictions with observable data

A market demand curve:

can be estimated with statistical techniques

The ____________ assumption applies to model building in which some important variables are held constant.

ceteris paribus

whether two goods are substitutes or complements can be determined by computing the:

cross elasticity of demand

Which is the most likely effect of an increase in the price of computer software upon the market for laptop computers?

decreased equilibrium price and decreased equilibrium quantity

Alfred Marshall is primarily responsible for:

developing the law of supply and demand.

unlike marginal utility analysis, indifference curve analysis:

does not assume that consumers measure utility for various possible consumption choices

Investment in human capital refers to:

education, on-the-job training, and professional training activities

if price elasticity of demand is greater than one, the product is said to be:

elastic

The marginal utility curve slopes up at a decreasing rate

false

all industries in all countries benefit from increased international trade

false

an increase in the price of a good causes a decrease in money income

false

as your income increases, you are less likely to purchase normal goods.

false

if the price elasticity of demand is 1.1, then the demand curve is called unitary elasticity.

false

indifference curve analysis uses more restrictive assumptions than marginal utility analysis

false

mathematically, the law of demand refers to the positive relationship between price and quantity demanded

false

scatter plots use one variable as time in addition to one other variable to determine possible relationships...

false

surpluses but not shortages can exist when a market is in equilibrium

false

the elasticity value of a perfectly elastic demand curve is zero.

false

there are no situations that lie outside economic models

false

in which of the following can economic analysis be applied?

global environmental policies, choice of study time vs leisure activities, local government spending choices

What indicator is not generally associated with highly productive countries?

income inequality is high

All of the following would limit the specialization that accompanies international trade except:

increasing domestic labor costs

the party who bears the economic burden of a tax:

indicates the incidence of taxation

a firm increases price and total revenues increase. from this we can conclude that its demand:

is price inelastic

Marginal utility:

is the level of satisfaction received from consuming an additional unit.

microeconomics deals with:

labor markets, environmental policy, markets for oranges

If a consumer's budget decreases, the budget line shifts to the _________ and a consumer sees a ___________ level of satisfaction.

left;lower

the satisfaction received from consuming an additional unit of a given product or service is:

marginal utility

A price ceiling is a legally mandated:

maximum price above which goods or services cannot be sold.

if soda and potato chips are complements, then their cross elasticity of demand is:

negative

if the demand for iPhone rises as income increase, then the iPhone is an:

normal good

Which of the following would not be a market transaction??

payment made to a disaster victim

Jeremy Bentham's idea of "Felicific Calculus" assumes that:

people act as calculators in an attempt to maximize utility.

Which of the following is not a determinant of demand

price of the good

The process of converting factors of production into goods and services is called:

production

proposals to increase an excise tax usually focus on:

products with price elastic demand

A poultry rancher discovered what when she increased the price of organic eggs from $0.75 to $1.00 per dozen, the sales of her eggs fell from 300 dozen per week to 200 dozen per week. If she wants to maximize her total revenue from egg sales, she should:

reduce the price of eggs back to $0.75

economic models must:

rely on the ceteris paribus assumption

Suppose the Terrific Tube Company ran a very successful advertising campaign. Supply/demand analysis would suggest that the campaign would cause the equilibrium price to _______ and the equilibrium quantity to_______.

rise;rise

if the substitution effect, as the price of a good:

rises, consumers substitute cheaper products for the good.

An increase in productive resources available for use will:

shift the PPF outward

When people cannot buy all of a good they demand at the going price, there is a:

shortage

Which of the following represents a market period?

spring peach harvest in central Texas.

deadweight losses are relatively large when there are no changes in:

supply and demand are elastic, and there are no changes in demand and supply is elastic

the concept of marginal utility is:

the change in total utility from consuming an additional unit of a good

a good is a normal good if:

the demand curve shifts out if income goes up

the law of demand says that:

the higher the price, the quantity consumers want to buy.

Human capital is;

the improvement to labor capabilities from training, education, and apprenticeship programs

important determinants of rapid economic growth and improved living standards include all the following except:

the need to erect tariff barriers to protect firms from foreign companies

if a store deals in a good that has a unitary elastic demand, what would be the net results on their total revenue of an increase in price?

the net change would be zero, so no change in total revenue

other factors held constant, as the price of an iPad rises:

the quantity demanded for iPad falls

Janice gets 600 total utils from consuming two hamburgers. The utility derived from consuming a third hamburger equals 50 utils. Which of the following statements would be true?

the total utility derived from consuming four hamburgers will be greater than 650.

If the price of gasoline rises, then:

there is an upward movement along the demand curve for gasoline.

suppose the price of a hamburger is $2, and the price of a soft drink is $1. If jill has $10, than she can buy:

three hamburgers and four soft drinks

if the price of a product whose demand is elastic goes up:

total revenue will fall

One of the major limits to trade is:

transactions costs

As the price of a bag of Doritos increases, the quantity demanded of this product will decrease.. (true or false)

true

If the price of one complementary good increases, then the demand for the other complementary good shifts left.

true

according to the economic model of utility maximization, it is the interaction of the budget constraint with utility that determines how much of various products consumers will purchase.

true

as it relates to utility, consumer surplus is a bonus to the consumer.

true

correlation between two variables is not enough evidence to suggest that a casual relationship between the two variables

true

economists do not consider money to be real capital

true

if price changes by 10% and quantity demand changes by 4%, then the demand curve is said to be price inelastic.

true

the "status quo bias," discovered by behavioral economists, says that people have a tendency to go along with the default option

true

the component common to all markets is the transaction.

true

the concept of scarcity implies that people must make choices among alternatives

true

the level of satisfaction is measure in utils

true

titles, labels for axes, and a statement of how the data are measured help with the interpretation of graphs

true

If an economy is operating at a point that is inside of its production possibilities frontier, then it can be assumed that its resources are:

underutilized

Which of the following is a case when the government should intervene in the economy?

when the market fails to provide goods efficiently

the income effect shows that:

when the price of a good decreases, income rises, and quantity demanded increases

Astrid currently consumers only milk and honey. She drinks 4 quarts of mild priced at $3 per quart and gets 30utils for the last quart. She consumes 13 jars of honey at a price of 75 cents per jar and gets 7.5 utils for the last jar? Is Astrid maximizing her utility?

yes