ECON 201 FINAL STUDY GUIDE

if the supply and demand curves for a product both decrease, than equilibrium... a.) quantity must decline, but equilibrium price may rise, fall, or remain unchanged b.) price must fall, but equilibrium quantity may rise, fall, or remain unchanged c.) quantity and equilibrium price may both decline d.) quantity must fall and equilibrium price must rise

a.) quantity must decline, but equilibrium price may rise, fall, or remain unchanged

A decrease in demand is depicted by a a.) shift to the left b.) shift to the right c.) movement on the demand curve d.) no change

a.) shift to the left

Economics may be best defined as: a.) social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity b.) study of why people are rational c.) empirical testing of value judgements through the use of logic d.) interaction between macro and micro considerations

a.) social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

A leftward shift of a product supply curve might be caused by... a.) some firms leaving an industry b.) an increase in consumer income c.) a decline in the price of needed inputs d.) an improvement in the relevant technique of production

a.) some firms leaving an industry

In a competitive market economy, firms select the least-cost production because a.) to do so will maximize the firms' profit b.) "dollar voting" by consumers mandates such a choice c.) such choices will result in full employment d.) this will prevent new firms from entering the industry

a.) to do so will maximize the firms' profit

Which of the following will NOT cause the demand for product K to change? a.) an increase in incomes of buyers of product K b.) a change in the price of product K c.) a change in the price of close-substitute product J d.) a change in consumer tastes for product K

b.) a change in the price of product K

Assuming competitive markets with typical supply and demand curves, which of the following statements is correct? a.) an increase in supply with a decrease in demand will result in an increase in price b.) an increase in demand with no change in supply will result in an increase in sales c.) an increase in supply with no change in demand will result in a decrease in sales d.) an increase in supply with no change in demand will result in an increase in price

b.) an increase in demand with no change in supply will result in an increase in sales

A recent study found that an increase in the federal tax on beer (which would increase the price of beer) would reduce the demand for marijuana. Based on this information we can conclude that: a.) beer is an inferior good b.) beer and marijuana are complementary goods c.) marijuana is an inferior good d.) beer and marijuana are substitute goods

b.) beer and marijuana are complementary goods

In which of the following instances is the effect on equilibrium price ( whether it rises, falls, or remains unchanged) dependent on the magnitude of the shifts in supply and demand? a.) supply rises and demand falls b.) demand rises and supply rises c.) demand rises and supply falls d.) supply falls and demand remains constant

b.) demand rises and supply rises

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand? a.) the income effect b.) diminishing marginal utility c.) the substitution effect d.) the rationing function of prices

b.) diminishing marginal utility

Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of? a.) imperfect information b.) opportunity costs c.) marginal benefits that exceed marginal costs d.) normative economics

b.) opportunity costs

In deciding whether to study for an economics quiz or go to a concert, one is confronted by the idea(s) of: a.) money and real capital b.) scarcity and opportunity costs c.) full production d.) complementary economic goals

b.) scarcity and opportunity costs

If the prices of product L increases, the demand curve for close-substitute product J will... a.) shift to the left b.) shift to the right c.) remain unchanged d.) shift downward toward the horizontal axis

b.) shift to the right

In economics, the pleasure, happiness, or satisfaction received from a product is called? a.) status fulfillment b.) utility c.) rational outcome d.) marginal cost

b.) utility

Which of the following is one of the 5 fundamental questions? a.) How much should society save? b.) what goods and services should be produced? c.) which products will be in scarce supply and which in excess supply? d.) Who should appoint the head of the central bank?

b.) what goods and services should be produced?

Which of the following expressions best states the idea of opportunity cost? a.) "a penny saved is a penny earned" b.) "all that glitters is not gold" c.) "there is no such thing as a free lunch" d.) "he who hesitates is lost"

c.) "there is no such thing as a free lunch"

Which of the following statements is correct? a.) An increase income will reduce the demand for a normal good b.) a decline in the price of X will increase the demand for substitute product Y c.) An increase in the price of C will decrease the demand for complementary product D d.) a decrease in income will decrease the demand for an inferior good

c.) an increase in the price of C will decrease the demand for complementary product D

Economic profits and losses: a.) are both considered by economists to be part of production costs b.) have no influence on the composition of domestic output c.) are essential to the reallocation of resources from less desired to ore desired goods d.) equalize the distribution of income in the long run

c.) are essential to the reallocation of resources from less desired to ore desired goods

An increase in the price of a product will reduce the amount of it purchased because a.) consumers substitute relatively high-prices for relatively low-priced products b.) the higher price means that real incomes have risen c.) consumers will substitute other products for the one whose price has risen d.) the higher price will signal to consumers that the good is of low quality

c.) consumers will substitute other products for the one whose price has risen

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread, we would expect the price of wheat to: a.) rise, the supply of bread to decrease, and the demand for potatoes to decrease b.) rise, the supply of bread to increase, and the demand for potatoes to increase c.) rise, the supply of bread to decrease, and the demand for potatoes to increase d.) fall, the supply of bread to increase, and the demand for potatoes to increase

c.) rise, the supply of bread to decrease, and the demand for potatoes to increase

Graphically, the market demand curve is a.) steeper than any individual demand curve that is part of it b.) the vertical sum of individual demand curves c.) the horizontal sum of individual demand curves d.) greater than the sum of the individual demand curves

c.) the horizontal sum of the individual demand curves

When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls, and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls? a.) an increase in the demand for Nike soccer balls b.) the price effect c.) the substitution effect d. the income effect

c.) the substitution effect

The market system's answer to the fundamental question "who will get the goods and services" is essentially a.) "those who most need them" b.) "those who get utility from them" c.) "those who physically produced them" d.) "those most willing and able to pay for them"

d.) "those most willing and able to pay for them"

assume that the demand curve for product C is downsloping. If the price of C falls from $2.00 to $1.75 a.) the demand for C will increase b.) the demand for C will decrease c.) a smaller quantity of C will be demanded d.) a larger quantity of C will be demanded

d.) a larger quantity of C will be demanded

which of the following is NOT a typical characteristic of a market system? a.) private property b.) competition in product and resource markets c.) freedom of enterprise d.) government ownership of most property resources

d.) government ownership of most property resources

The construction of the supply and demand curves assumes that the primary variable influencing decisions to produce and purchase goods is: a.) incomes b.) preferences c.) expectations d.) price

d.) price

The law of demand states that, other things equal: a.) the larger the number of buyers in a market, the lower the product price will be b.) consumers will buy more of a product at high prices than at low prices c.) price and quantity demand are directly related d.) price and quantity demanded are inversely related

d.) price and quantity demanded are inversely related

The demand for most products varies directly with changes in consumer incomes. Such products are known as... a.) normal goods b.) inferior goods c.) complementary goods d.) competitive goods

normal goods

which of the following is a distinguishing factor or laissez-faire capitalism? a.) minimal government intervention b.) public ownership of all capital c.) a circular flow of goods, resources, and money d.) central planning

a.) minimal government intervention

An increase if quantity supplied is depicted by a a.) movement from point a to b b.) shift to the right

a.) movement from point a to be

The economic perspective entails: a.) a comparison of marginal benefits and marginal costs in decision making b.) rejection of the scientific method c.) irrational behavior by individuals and institutions d.) short-term but not long-term thinking

a.) a comparison of marginal benefits and marginal costs in decision making

if producers must obtain higher prices than before to produce a given level of output, then the following has occurred: a.) a decrease in supply b.) an increase in demand c.) an increase in supply d.) a decrease in demand

a.) a decrease in supply

Two major virtues of the market system are that it: a.) allocates resources efficiently and allows economic freedom b.) results in price-level stability and a fair personal distribution of income c.) eliminates discrimination and minimizes environmental pollution d.) results in an equitable personal distribution of income and always maintains full employment

a.) allocates resources efficiently and allows economic freedom

A person should consume more of something if its marginal a.) benefit exceeds marginal cost b.) costs exceeds marginal benefit c.) benefit is still better d.) cost equals its marginal benefit

a.) benefit exceeds marginal cost

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that: a.) bicycles are normal goods b.) b>0 There are many goods that are substitutes for bicycles c.) there are few goods that are substitutes for bicycles d.) there are many goods that are complementary to bicycles

a.) bicycles are normal goods

Which of the following statements is true? a.) if supply increases and demand decreases, equilibrium price will fall b.) If supply declines and demand remains constant, equilibrium price will fall c.) If demand increases and supply decreases, equilibrium price will fall d.) If demand decreases and supply increases, equilibrium price will rise

a.) if supply increases and demand decreases, equilibrium price will fall