Econ 211 test 1 review (quiz questions¬es)
Socialism Economic System
- government controls everything to force equality - evens out wealth among people, give everyone equal/fair standing in society, provide services through taxes - the government is 'for' the people - believe that capitalists take advantage of workers - believe that unequal distribution of wealth is unfair - tend to be democracies - major industries owned by the people (tv stations railways telephones)
PPC (Production Possibilities Curve)
-A curve showing the different combinations of two goods or services that can be produced where the available supplies of resources and technology are fixed. -shows limits of production
Demand Curve
-a graph of the relationship between the price of a good and the quantity demanded -Increase in demand = demand curve shifts right
Determinants of Price Elasticity of Demand
-necessities vs luxuries -availabilty of substitutes -price relative to income -time/amount of time passed after chance in price
law of demand
-price increase, quantity demand decrease -price decrease, quantity demand increase
income elasticity of demand
-the percent change in the quantity of a good demanded when a consumer's income changes divided by the percent change in the consumer's income -Increase in income causes demand of normal goods to increase
export
A good or service sold to another country.
Monopoly
A market in which there are many buyers but only one seller. -made to keep out competition in market
Oligopoly
A market structure in which a few large firms dominate a market
regressive tax
A tax for which the percentage of income paid in taxes decreases as income increases
progressive tax
A tax for which the percentage of income paid in taxes increases as income increases
Capitalism
An economic system based on private ownership(individuals own and operate majority of business) of capital
private goods
Benefits and services over which the owner has full control of their use.
demand
Consumer willingness and ability to buy products
Capital, as economists use the term, refers to
Final goods that are used to produce other goods and services
When an economy is producing efficiently, it is
Getting the maximum goods and services possible from the available resources.
normal goods
Goods for which demand goes up when income is higher and for which demand goes down when income is lower.
supply
The amount of goods available
Microeconomics
The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.
economics
The study of how people seek to satisfy their needs and wants by making choices
Opportunity cost is
What is given up in order to get something else.
Suppose the quantity demanded of ski boats falls from 4.0 million to 3.0 million as a result of an average price increase from $20,000 to $25,000 per boat. The absolute value of the price elasticity of demand is closest to Select one: a. 1.29. b. 0.20. c. 0.78. d. 0.29.
a
Ceteris Paribus
a Latin phrase that means "all other things held constant"
external benefit
a benefit received by people other than the consumers or producers trading in the market
inferior goods
a good that consumers demand less of when their incomes increase
For product X, the price elasticity of demand has an absolute value of 3.5. This means that quantity demanded will increase by Select one: a. 3.5 percent for each 1 percent decrease in price, ceteris paribus. b. 3.5 units for each $1 decrease in price, ceteris paribus. c. 1 unit for each $3.50 decrease in price, ceteris paribus. d. 1 percent for each 3.5 percent decrease in price, ceteris paribus.
a.
Suppose that if your income is $100,000, your tax is $20,000, but if your income is $200,000, your tax is $45,000. Such a tax is Select one: a. Progressive. b. Regressive. c. A flat tax. d. Proportional.
a.
Which of the following is most likely a private good? Select one: a. Bicycles. b. National defense. c. The administration of justice. d. Flood control
a.
Ceteris paribus, if buyers expect the price of airline tickets to fall in the future, then right now there should be Select one: a. A decrease in the demand for airline tickets. b. An increase in the demand for airline tickets. c. A decrease in the supply of airline tickets. d. No change in the supply of or demand for airline tickets because the price is not changing right now.
a. a decrease in demand for airline tickets
Ceteris paribus, which of the following is most likely to cause an increase in the quantity demanded of perfume? Select one: a. A decrease in the price of perfume. b. An increase in the price of electricity. c. An increase in income. d. A decrease in tastes for perfume.
a. a decrease in price of perfume
Ceteris paribus, if the subsidies given to corn syrup producers decrease, then we can expect Select one: a. A decrease in the supply of corn syrup. b. An increase in the supply of corn syrup. c. An increase in the demand for corn syrup. d. A decrease in the demand for corn syrup.
a. a decrease in the supply of corn syrup
Ceteris paribus, which of the following would generally cause an increase in the demand curve for new automobiles? Select one: a. An increase in consumers' income. b. The new models being perceived as ugly compared with old models. c. Consumer expectations that the price of new automobiles will be lower next year. d. A decrease in the price of new automobiles.
a. an increase in consumer income
Assume that pencils and pens are substitutes. If the price of pencils rises ceteris paribus, then we will see Select one: a. An increase in the demand for pens. b. An increase in the supply of pens. c. A decrease in the supply of pens. d. A decrease in the demand for pens.
a. an increase in the demand for pens
In economics, scarcity means that Select one: a. Society's desires exceed resources available. b. A shortage of a particular good will cause the price to fall. c. A production possibilities curve cannot accurately represent the trade-off between two goods. d. The market mechanism has failed.
a. society desires exceed resources available
The production possibilities curve illustrates Select one: a. The limitations that exist because of scarce resources. b. That there is no limit to what an economy can produce. c. That there is no limit to the level of output. d. The existence of unlimited wants and resources.
a. the limitations that exist because of scarce resources
Sam owns a taco restaurant, and he conducted a consumer survey that indicates that the price elasticity of demand for his restaurant is 3.5. You would advise Sam to Select one: a. Keep his price the same to maximize revenues. b. Lower his price to increase revenue. c. Raise his price to increase revenues. d. Offer more high-priced products.
b
Which of the following will cause the production possibilities curve to shift inward? Select one: a. An increase in knowledge. b. A decrease in the size of the labor force. c. A technological advance. d. An increase in the working-age population.
b. a decrease in the size of the labor force
A technological advance would best be represented by Select one: a. A shift inward of the production possibilities curve. b. A shift outward of the production possibilities curve. c. A movement from the production possibilities curve to a point inside the production possibilities curve. d. A movement from inside the production possibilities curve to a point on the production possibilities curve.
b. a shift outward of the production possibility curve
Ceteris paribus, which of the following is most likely to cause an increase in the quantity supplied of perfume? Select one: a. An increase in the salaries paid to perfume makers. b. An increase in the price of perfume. c. An increase in the number of sellers of perfume. d. An improvement in perfume-making technology.
b. an increase in price of perfume
Ceteris paribus, which of the following is most likely to cause a decrease in the supply of skateboards? Select one: a. An increase in the price of skateboards. b. An increase in the cost of materials used to produce skateboards. c. An improvement in skateboard-making technology. d. All of the choices are correct.
b. an increase in the cost of material to produce skateboards
With respect to factors of production, which of the following statements is NOT true? Select one: a. In order to produce any good or service, it is necessary to have factors of production. b. Only those resources that are privately owned are counted as factors of production. c. Factors of production include land, labor, capital, and entrepreneurship. d. Factors of production are also known as resources.
b. only those resources that are privately owned are counted as factors of production
Suppose a university raises its tuition by 6 percent and as a result the enrollment of students decreases by 3 percent. The absolute value of the price elasticity of demand is Select one: a. 8.0. b. 6.0. c. 0.5. d. 2.0.
c
Suppose computer prices at an office supply store fall from $1,000 to $900 and as a result the quantity demanded of typewriters decreases from 40 to 20 per month. The cross-price elasticity of demand is closest to Select one: a. 5.0. b. 0.16. c. 6.3. d. 0.2.
c
A tax is regressive if it takes a Select one: a. Larger number of dollars as income rises. b. Larger number of dollars as income falls. c. Smaller fraction of dollars as income rises. d. Smaller fraction of dollars as income falls.
c.
If the consumption of a good yields external benefits, then Select one: a. The social demand is equal to the market demand. b. The social demand is less than the market demand. c. The social demand is greater than the market demand. d. There is neither social demand nor market demand for the good.
c.
Which of the following occurs if government intervention forces the economy inside the production possibilities curve? Select one: a. Market failure. b. Income inequality. c. Government failure. d. Externalities.
c.
Which of the following produces external benefits? Select one: a. All of the choices are correct. b. Garbage dumped in the Atlantic Ocean. c. College students getting vaccinated against the flu. d. Passive smoke in a public building.
c.
Peanut butter and jelly are complements. A decrease in the price of one will result in Select one: a. An increase in the quantity demanded of the other. b. A decrease in the demand for the other. c. An increase in the demand for the other. d. A decrease in the quantity demanded of the other.
c. an increase in demand for the other
According to the law of demand, a demand curve Select one: a. Exceeds the economy's ability to produce. b. Has a positive slope. c. Has a negative slope. d. Is a horizontal or flat line.
c. has a negative slope
A rightward shift in a demand curve and a leftward shift in a supply curve both result in a Select one: a. Lower equilibrium price. b. Higher equilibrium quantity. c. Higher equilibrium price. d. Lower equilibrium quantity.
c. higher equilibrium price
Elasticity of supply looks at Select one: a. The responsiveness of sellers to a change in consumer's incomes. b. How responsive producers are to a change in quantity demanded. c. How responsive sellers are to a change in price. d. How much quantity demanded changes with a change in price.
c. how responsive sellers are to a change in price
A change in demand means there has been a shift in the demand curve, and a change in quantity demanded Select one: a. Also means demand has shifted. b. Results from a change in price of other goods. c. Means that price has changed and there is movement along the demand curve. d. Means a shortage or surplus will result from holding prices constant.
c. means that price has changed and there is movement along demand curve
Smart phones and apps are complementary goods. The cross price elasticity of demand between smart phones and apps is expected to be. Select one: a. Equal to zero. b. Undefined. c. Negative. d. Positive.
c. negative
The opportunity cost of studying for an economics test is Select one: a. Negative because it may improve your grade. b. Zero because you knew when you registered for the class that studying would be required. c. The activity that is the best alternative use of your time. d. The money you spent on tuition for the class.
c. the activity that is the best alternative to your time
If there is a surplus at a given price, then Select one: a. That price is lower than the equilibrium price. b. The price is zero. c. That price is greater than the equilibrium price. d. The market is in equilibrium at that price.
c. the price is greater than the equalibruim price
If the elasticity of demand is 3, and the price rises by 15 percent, then Select one: a. The quantity demanded will rise by 4.5 percent. b. The percentage change in quantity demanded will fall as income rises. c. The quantity demanded will fall by 45 percent. d. The quantity demanded will increase by 5 percent.
c. the quantity demanded will fall by 45 percent
The market mechanism may best be defined as Select one: a. The process by which the production possibilities curve shifts inward. b. The use of market signals and government directives to select economic outcomes. c. The use of market prices and sales to signal desired output. d. Price regulation by government.
c. the use of market prices and sales to signal desired output
Which of the following is the best example of land? Select one: a. The ethanol refined from corn. b. A barber's chair. c. The water used to make a soft drink. d. A factory that produces new goods and services.
c. the water used to make a soft drink
a NEGATIVE cross price elasticity of demand means the items are...
complements
Ceteris paribus, as the number of substitutes for a good increases, the Select one: a. Cross-price elasticity of demand should become negative. b. Income elasticity of demand should become negative. c. Price elasticity of demand should become smaller. d. Price elasticity of demand should become larger.
d
Ceteris paribus, if income increases and as a result, the demand for good X increases and the demand for good Y falls, Select one: a. Goods X and Y are complementary goods. b. Good X is an inferior good and good Y is a normal good. c. Goods X and Y are substitute goods. d. Good X is a normal good and good Y is an inferior good.
d
If incomes fall by 5 percent and the quantity demanded for new cars falls by 10 percent, Select one: a. New cars are a normal good, and the income elasticity is +.5. b. New cars are an inferior good, and the income elasticity is +2.0. c. New cars are an inferior good, and the income elasticity is +0.5. d. New cars are a normal good, and the income elasticity is +2.0.
d
When the price of taking a ride in Uber increases, the demand for Lyft rides increases, ceteris paribus. Uber and Lyft are therefore Select one: a. Inelastic. b. Elastic. c. Complements. d. Substitutes.
d
Which of the following is not a factor of production? Select one: a. A bulldozer. b. Six thousand acres of farmland. c. A physician. d. $100,000 cash.
d. $100,000
At the equilibrium price, there are Select one: a. Surpluses. b. Shortages. c. Excess inventories. d. No shortages or surpluses.
d. no shortage or surpluses
A market is said to be in equilibrium when Select one: a. Demand is fully satisfied at all alternative prices. b. The buying intentions of all consumers are realized. c. The supply intentions of all sellers are realized. d. The quantity demanded equals the quantity supplied.
d. the quantity demanded equals the quantity supplied
factor market
factors of production are bought and sold
cross-price elasticity of demand
how responsive consumers of good (x) are to change in price of a related good
price elasticity of demand
how responsive consumers of good (x) are to change in price of good (x)
4 factors of production
land, labor, capital, entrepreneurship
factors of production examples
land: labor: capital: entrepreneurship:
price elasticity of supply
measures how sellers react to price change
E= infinity
perfectly elastic demand
E= 0
perfectly inelastic aka quantity demanded does not respond to no price change
import
quantity of goods citizens buy from abroad
when E>1 or E<1 the firm needs to ____________ to INCREASE total revenue
reduce price
a POSITIVE cross price elasticity of demand means the items are ....
substitutes
quantity demanded
the amount of a good or service that a consumer is willing and able to purchase at a given price
equilibrium price
the price that balances quantity supplied and quantity demanded
Macroeconomics
the study of economy-wide phenomena, including inflation, unemployment, and economic growth
complements
two goods for which an decrease in the price of one leads to a increase in the demand for the other (consumed together)
substitutes
two goods for which an increase in the price of one leads to an increase in the demand for the other (replacements)
product market
were finished goods/services( cars,tv) are bought and sold
