ECON 202: quiz 2

Which of the following was NOT in the top 10 countries in terms of Economic Freedom according to the Heritage Foundation (as shown and discussed in class)

United States

If the actual price of t-shirts is $7, there is

a shortage of 8 t-shirts

Comparative advantage is determined by the

amounts of resources to produce a good in different countries.

Other things remaining same, an increase in demand will lead to:

an increase in the equilibrium price and the equilibrium quantity.

When people's incomes increase, the demand for a good increases. The good is called

an inferior good

If two countries are producing the same two products it is mutually beneficial if the countries specialize then trade. How is it determined who specializes in the production of which product?

by the lowest opportunity cost of production, comparative advantage.

Suppose people buy more of good 1 when the price of good 2 falls. These goods are

complements

Cupcakes and granolas bars are substitutes in consumption. The price of a granola increases so the demand for

cupcakes will increase, that is, the demand curve will shift rightward.

The general relationship between economic freedom per capita (per person) income is

positive - higher economic freedom leads to a higher per capita

In a market system, what provides individuals the information needed to make decisons?

prices

The quantity demanded of a good is:

the amount of a good that buyers are willing to purchase at a given market price.

According to the law of increasing opportunity costs

the amount of money it takes to produce a good increases as more of the good is produced.

Suppose that a product benefits from a successful advertising campaign. The result is that

the demand for the product increases.

While intuitively it makes sense that a demand curve is downward sloping, the technical rationale for the consumer's inverse relationship between price and quantity demand is

the law of decreasing marginal benefits

When a market is in equilibrium,

the number of potential buyers in the market is exactly equal to the number of potential sellers in the market.

A change in the quantity demanded of a product is the result of a change in

the price of the product.

The Law of Supply states that

there is a positive relationship between price and quantity supplied, all else constant.

What happens if the price of a product is below the equilibrium price?

there will be an excess demand for the product

The law of demand implies that when people are asked to conserve water during a drought,

they will refuse to cooperate.