ECON 201 Test 1

Which of the following has the greatest effect on the quantity supplied that producers are willing and able to supply?

price

The supply curve illustrates the relationship between

price and quantity supplied

A shortage results from an excess of quantity _______.

demanded

With a price ceiling, quantity ____ will exceed quantity ____, resulting in a persistent shortage of product.

demanded, supplied

The demand curve measures quantity ___ on the horizontal axis and ____ on the vertical axis.

demanded; price

5 fundamental questions

1. What goods and services will be produced? 2. How will the goods and services be produced? 3. Who will get the goods and services? 4. How will the system accommodate change? 5. How will the system promote progress?

A producers willingness to produce a specific quantity of a good due to a change in the price of the good is referred to as

A change in quantity supplied

A decrease in demand while holding supplies constant results in __________.

A decrease in both the equilibrium price and quantity

What consist of a large number of independently acting buyers and sellers?

A highly competitive market

Which pair exemplifies complementary goods?

A hotdog and relish

What is money?

A means to obtain resources and not a resource itself

The price actually paid for the good is not reflected in the demand because the demand is merely:

A statement of buyers intentions regarding the buying of the good

What is an effect of a decrease in supply while holding demand constant

An increase in equilibrium price and a decrease in equilibrium quantity

Which of the following causes and increase in the quantity of a good purchased

An increase in the number of buyers

The demand for a normal good is likely to increase due to______.

An increase in the number of buyers A decrease in the price of complementary goods

What is the law of opportunity cost?

As more of a particular good is produced it's marginal opportunity cost increases

Characteristic of demand

As price falls, quantity demanded rises

At the market ______ price quantity demanded equals quantity ______

Clearing Supplied

A ______ good is one used together with another good

Complementary

__________ goods are used together with other goods?

Complementary

The determinants in demand are assumed to be _______ when when a demand curve is drawn

Constant

The concept of demand can be summarized by a schedule or curve showing the quantity of a problem that would be:

Consumed a various possible prices

What is implicit cost?

Cost you must give up in order to use as a factor of production

A normal good is an item for which _________ varies directly with money income

Demand

The basic _______ of _________ are resource prices technology, taxes and subsidies, prices of other goods, producer expectations, and the number of sellers in the market

Determinants of supply

Consumers will only buy additional units of the good if the price of the good is reduced is an example of

Diminishing marginal utility

What is explicit cost?

Direct payments made by others while running a business ex: rent and materials

What are the types of specialization?

Division of labor which is that we will all have our own job with a title Geographic specialization which is how the climate and cheaper labor influences capital goods

When a line moves right on a graph what is that?

Economic growth

What does marginal mean?

Extra

What are positive economics?

Factual- if everyone calculates correctly, we will get the same answer all over the world

What decrease demand for any good or service?

Falling incomes when product is a normal good A change in consumers taste

True/False: A rise in income causes a decrease in demand for most products and a decrease in income causes an increase in demand for most products

False

True/False: a general rise in income causes a decrease in demand for most products and a fall in income causes an increase in demand for most products, other things equal

False

True/False: allocative efficiency is the particular mix of goods and services least valued by society

False

True/False: as more firms enter industry the supply curve shifts left

False

True/False: the fundamental characteristic of demand, other things equal, is that as the price falls the quantity demand for the item decreases

False

True/False: the inverse relationship between price and quantity demanded is called the law of supply?

False

A price __________ is a minimum price fixed by the government, generally imposed above the price, which is otherwise known as the equilibrium price.

Floor

_______ resource prices raise production costs and, assuming a fixed product price, ________ profits

Higher; reduce

What is utility?

How much pleasure or satisfaction you get out of something

An increase in demand while holding supplies constant results in a ___________ in both the equilibrium price and quantity.

Increase

Higher resource prices _________ the cost of production

Increase

A decrease in supply while holding demand constant results in a _____ in the equilibrium price and a _______ in equilibrium quantity

Increase Decrease

What is not an example of improvement in technology affecting supply

Increase subsidies to farmers for product if more corn

All things equal, as the buyer's income rises the willingness and ability to buy a normal product____?

Increases

If the government of a country subsidized the production of a good, it:

Increases supply Lowers the cost of production

There is a/an __________ relationship between the price of a good or service and the quantity demand for that good or service.

Inverse

When two variables are be examined and one variable moves one way and the other one moves the other way this is called a __________?

Inverse relationship

What is normative economics?

Involves your values and judgements which is different all over the world

As firms leave an industry supply decreases. This is illustrated as a shift in the supply curve to the ______.

Left

A price ceiling is the maximum legal price a seller may charge for a product or service where a price at or below is _______ and a price above is ________.

Legal; illegal

If cost of production rise, the producer has an incentive to produce ______ output

Less

The income affect indicates that a ________ price increases the purchasing power of income enabling consumers to purchase _______ of a product

Lower; more

What is economics concerned with?

Making optimal choices under conditions of scarciry

What is the economizing problem?

Many wants and limited resources

The added cost of producing one more unit of output is called ________ cost.

Marginal

The equilibrium price is otherwise known as the ________ price

Market-clearing

All things equal firms will produce and offer for sale _________ of their product at a high price than at a low price

More

Is a farmer sharing his surplus with his neighbors a market?

No

Example of a substitute

Pepsi and coke

According to the law of supply, price and quantity supplied have a _________ relationship

Positive

A change in command occurs due to a change in a consumers state of mind about purchasing a product that is based on something other than the _______ of the product?

Price

A change in quantity demanded is caused by and increase or decrease in the _______of the product under consideration and nothing else.

Price

A change in quantity supplied is caused by an increase or decrease in the _________ of the product under consideration and nothing else

Price

On a supply curve, ________ is labeled on the vertical axis

Price

Determinants of Demand

Price, diminishing marginal utility and income

A change in __ causes a movement along the supply curve

Product price

The production of a good or service in the least costly way is k own as _______ efficiency

Productive

The interaction between buyers and sellers determines the equilibrium price and ________

Quantity

The prices of the ________ used in the production process help determine the cost of production incurred by firms

Resource

A change in _____ causes the supply curve of a product to shift left or right

Resource prices

If prices of a good or service are expected to increase in the future, demand for that good or service will ________ today. If prices are expected to decrease in the future, demand today will ______.

Rise; fall

What is rational self interest?

Something you do to help someone else but it also helps you and if it didn't you wouldn't do it

Income and _________________ effects combine to make consumers willing and able to buy more of a product at a lower price than a higher price.

Substitution

A surplus is also known as an excess of_____.

Supply

An increase in _______ while holding a demand constant results in a decrease in price and an increase in quantity

Supply

Producers expectations of future prices are a determinant of

Supply

The prices of substitute gods that are used in production is a determinant of _________

Supply

________ refers to the production of a product, where as demand refers to the consumption of a product

Supply

Equilibrium price and quantity in a market changes when there is a change in _______.

Supply and demand

A demand schedule illustrates the relationship between price and quantity in a __________ format, where as the demand curve is a ______ representation

Tabular; graphical

Which of the following specifically refers to demand?

The buyers side of the market

What are the economic systems?

The command system where the government has ownership of resources The market system where the government only has some control

Which economic system is more popular throughout the world?

The market system

Which of the following does not shift supplied curve

The price of the product

What method does economics use?

The scientific method

What is economics?

The study of how people, organizations, and economies decided how to use limited resources to satisfy unlimited wants A social science

Why is trading with other countries cheaper?

They have different resources

What are the 4 categories of economic resources?

Things needed to make stuff Land Labor Capital Entrepreneurial ability

True or False: a change in quantity demanded is caused by an increase or decrease in the price of the product under consideration and nothing else.

True

True/False: resource costs or changes in these costs to production are responsible for shifts in the supply curve

True

When do government intervene to prevent prices from rising above or falling below their equilibrium levels?

When prices are to low for firms When prices to high for customers

Goods and their complement?

When the price of lettuce increases the demand for dressing decreases When the price of tuition decreases the demand for books increases

What is marginal analysis?

When you compare the marginal benefit to the marginal cost

What is Centris Paribus?

With everything being equal in an experiment you must take out the social sciences and then look at it

What are production possibilities?

You get rid of your weakest first and as you get closer to your best you start to "charge" more

What do you do with opportunity cost?

You weigh them and ask yourself how much money would I make?

Diminishing ______ states that, in any specific time period, buyers will derive less satisfaction from each additional unit of the product consumed.

marginal utility

What are the characteristics of the market system

private property, freedom of enterprise and choice, self-interest, competition, markets and prices,

Supply Determinants

resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, and the number of sellers in the market

A ___ the supply curve represents a change in supply while a ___ the supply curve represents a change in the quantity supplied

shift of; movement along