ECON (DEC 23-28)
Which one of the following statements is correct?
Government programs can be implemented with good intentions but can lead to undesirable outcomes because of unintended consequences.
Kelly is an attorney and also an excellent typist. She can type 120 words per minute, but she is pressed for time because she has all the legal work she can handle at $100 per hour. Kelly's friend Todd drives a taxi and would like some typing work but can only type 60 words per minute. According to the law of comparative advantage, Kelly should hire Todd to do her typing if and only if his wage rate is less than
$50 an hour
If the elasticity of supply is 2.0, what happens to quantity supplied following a 7 percent increase in price? Quantity supplied increases:
14 percent
A hurricane damaged much of the housing in Miami. Shortly thereafter, the price of plywood rose significantly. The events suggest that
an increase in the demand for plywood caused the price of plywood to rise
which of the following represents a positive statement?
a higher income tax rate will reduce the amount of time that people spend working
A price floor is:
a minimum price allowed by law
Ben is willing to work for $4/hour and an employer is willing to hire Ben for $7/hour. Which statements is TRUE?
a minimum wage of 7.50/hour would prevent this mutually beneficial exchange
Farmers can choose to produce eggs or milk. If there is an increase in the price of milk then what will be the effect in the egg market?
egg supply will decrease
Why do economists use the concept of elasticity in addition to measurement of the slope of the demand curve?
elasticities are independent of the unity to measure
If a steel manufacturer does NOT bear the entire cost of the sulfur dioxide it emits, it wil
emit a higher level of sulfur dioxide than is socially efficient
When the quantity demanded and quantity supplied in a market are equal, the market is said to be in
equilibrium
To be efficient, the revenue from taxation must provide goods that have benefits that ________ the deadweight loss caused by the taxation itself.
exceed
Which of the following is NOT a reason that monopolies arise?
excess. competition
which of the following most accurately states the economic significance of exchange?
exchange creates value by moving goods from parties who value them less to parties who value them more
A student noted that the football team won by a larger margin when the third-string played more minutes. Therefore, he recommended that the third-stringers become the first team. His conclusion was probably erroneous because he
failed to recognize that association is not causation
The economic way of thinking suggests that if the government imposed a $500 tax on owners of red automobiles,
fewer red automobiles would be produced and sold
If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that
fewer students will cheat
In heavily Catholic cities like Cincinnati, which of the following goods is likely to have more inelastic demand compared to cities with few Catholics
fish
There is a high degree of correlation in major cities between ice cream sales and homicides. Based on economic reasoning, what is most likely going on that explains this observed relationship?
ice Cream sakes and murders with increase in the summer but they are not causally related
Concern over the problem of released prisoners finding employment so they do not recidivate, especially among domestic minorities, has led policymakers to pass "ban the box" policies that prevent employers from asking about a candidate's criminal history until late in the hiring process. Economists Jennifer Doleac and Benjamin Hansen studied the effect of these policies and found that ban the box policies decreased the probability of being employed by 5.1 percent if you were a young African-American male. What is the best economic explanation for this finding?
if employers can't treat applicants as individuals, they use group attributes, and our criminal justice system incarcerates a large number of African American males
Which of the following is a statement of positive economics?
if taxes are over 50 percent of national income, job creation falls
On June 14, 2011, the Delaware Senate approved a gun buyback program. The yearlong program would authorize the state to pay $100 for every gun turned over to police. What sort of guns should Delaware officials expect to get if this plan becomes law? A.Small guns, usually used as self-defense in bad neighborhoods.B.Heavy guns, usually used by criminals to support their illegal enterprises.C.Guns that use a lot of bullets very quickly.D.Nonworking guns, usually kept in someone's back closet.
nonworking guns usually kept in someones back closet
Because of government price controls, a business must now sell soft-serve ice cream at half its original price. This business might respond by:
offering smaller servings of ice cream, reducing hours of operation, and skimping on toppings of nits, fudge sauce, and cherries
A rival good is one where:
one person's use prevents another person's ability to use that good at the same time.
An excludable good is:
one where people can be prevented from using the good.
Total surplus increases with practice of price discrimination only if:
output increases
According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study
outweighs the extra cost
Because producing more oil requires a significant increase in exploration and drilling costs, the supply curve for oil is:
relatively inelastic
The price elasticity of demand for gasoline measures the
responsiveness of customers to changes in the price of gasoline
If the price elasticity of supply is 4, an increase in the price of Good X by 5 percent causes the quantity supplied of it to:
rise by 20 percent
Public roads sometimes get congested, suggesting that public roads are:
rival
Bluefin tuna are:
rival and nonexcludable
Why do supply curves tend to be more elastic over time?
sellers have time to adjust and increase production
The presence of price floors in a market usually is an indication that:
sellers of the good or service outnumber the buyers
According to the law of supply, as the price of a good decreases
sellers will produce less of the good
According to the law of supply, as the price of a good increases,
sellers will produce more of it
A subsidy is:
similar to a reverse tax
The market supply curve for labor:
slopes up
A marginal change usually is a
small, incremental adjustment
An efficient equilibrium occurs when:
social costs equals social benefits
A person who tries to profit by guessing changes in future prices is a:
speculator
Which of the following is NOT a possible cause of the increasing return to college education since the 1980s?
the cost of college education has skyrocketed
In the automobile market, a rise in consumer income, other things being equal, will cause
the demand curve for automobiles to shift to the right
A single person's supply curve for labor slopes down when:
the person starts taking part of their income as leisure
If the price of the AIDS drug Combivir was driven down to marginal cost by competition:
there would be less incentive to invest in creating the next improved AIDS drug
How will consumers generally react to a decrease in the price of a product?
they will purchase more of it
Which of the following sayings best reflects the concept of opportunity cost?
time is money
Marginal revenue is always equal to the price of the product for a competitive firm
true
Since value is subjective, a good can be normal for one person and inferior for another. True False
true
The primary reason that AIDS drugs are priced well above cost is monopoly power.
true
We expect jobs that are inherently more dangerous to pay higher wages, which is a compensating differential.
true
n a perfectly competitive market, sellers who set their price above the market price will sell nothing.
true
In his autobiography (pp. 151-152), Mark Twain says the following: Once in Hartford the flies were so numerous for a time, and so troublesome, that Mrs. Clemens conceived the idea of paying George a bounty on all the flies he might kill. The children saw an opportunity here for the acquisition of sudden wealth. ... Any Government could have told her that the best way to increase wolves in America, rabbits in Australia, and snakes in India, is to pay a bounty on their scalps. Then every patriot goes to raising them. The response of citizens is an example of what economic principle?
unintended consequences
Which of the following would cause an increase in the price of gasoline and an expansion in the equilibrium quantity?
an increase in the popularity and use of sport utility vehicles that consumer a lot of gasoline per mile driven
Other things constant, which of the following would most likely cause the supply of garden hoses to decrease?
an increase in the price of plastic used to make garden hoses
The great economic problem is to:
arrange our limited resources to satisfy as many of our infinite wants as possible.
Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will
decrease the supply of soybeans
For a typical product, a decrease in consumer income will cause the market demand for the product to
decrease, which is a shift to the left off the demand curve
If the Bill and Melinda Gates Foundation were to buy out and destroy the patent for Combivir, which of the following would NOT be one of the effects?
drug companies would have no incentive to create new and better drugs
The signaling theory of education suggests that:
educated people are paid more not because they have more skills, but because their degree proves they are intelligent and conscientous
If the price of cocoa rises by 20 percent, the quantity supplied of cocoa rises by 4 percent. What is the elasticity of supply?
.2
Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450. Over this price range, the absolute value of the price elasticity of demand for Starbucks coffee is
1.25
When the price of Nike tennis shoes goes from $100 to $80, the quantity demanded increases from 20 to 30 million. Over this price range, the absolute value of the price elasticity of demand is
1.80
A shortage results when:
A price ceiling is imposed
One reason office cleaners in India earn less than office cleaners in the United States NOT because:
American economy is more productive than the Indian economy
Which of the following is an example of a rational decision?
Jim enjoys the feeling of wind in his hair enough to ride his motorcycle without a helmet, even though he fully realizes the potential for injury it creates by not wearing one in the unlikely event he is in an accident. AND the others
n the aftermath of the Great Recession (falling incomes) in 2008, McDonalds saw sales revenue increase. What is the best explanation for this result?
McDonald's is an inferior good
Which one of the following statements is correct?
Monopoly profit encourages firms to research and develop new drugs.
government's decision to subsidize the production of insulin for people with diabetes would mostly benefit the:
NOT producers and NOT both???
The more broadly a good is defined
The fewer substitutes it has so the less elastic is its demand.
Along the inelastic portion of a demand curve,
The percentage change in price will be more than the percentage change in quantity demanded.
Which of the following is true regarding private ownership?
With private ownership, owners are generally held accountable for using their resources in a manner that harms the resources of others through liability laws.
Which of the following is most clearly consistent with the basic postulate of economics - namely that incentives matter?
a political votes in favor of a bill because most of her constituents are strongly in favor of it
the difference between a positive economic statement and a normative statement is that
a positive statement must be true; a normative statement is often not true
Assuming that bus travel is an inferior good, a decrease in consumer income, other things being equal, will cause
a rightward shift in the demand curve for bus travel
If you compared the short-run demand and long-run demand for education at your WVU, you would almost certainly find that
a tuition increase would reduce enrollment more in the long run than in the short run
If a surplus exists in a market we know that the actual price is
above equilibrium price and quantity supplied is greater than quantity demanded
the difference between normal and inferior goods is that
an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward
Which of the following will reduce the supply of motorcycles?
an increase in taxes imposed on motorcycle producers
Rent controls are:
an inefficient way to help the poor in raising their standard of living.
Compared to the long run, consumers typically ___________ to price changes in the short run.
are less demand sesnstive
Which of the following is NOT an example of tying?
automobiles and engines
in an informed and voluntary exchange,
both parties receive something they value more than what they gave up
The economic inefficiency of a monopolist can be measured by the:
deadweight loss involved relative to a competitive firm
Unlike price floors, subsidies:
do not create surpluses
A free market with externalities ______ social surplus.
does not maximize
Markets are linked in unpredictable and creative ways by: A.entrepreneurs who look for methods of cutting costs.B.treaties that govern trade.C.careful planning by bureaucrats.D.treaties, entrepreneurs, and bureaucratic planning.
entrepreneurs who look for methods of cutting costs
An example of a common resource would be:
environment
Which would MOST LIKELY result after setting a price ceiling on automobiles?
fewer safety features
In a demand-and-supply diagram, the market price represents the value of the:
good in its next highest use
A college education in the United States:
has been shown to earn a wage premium
which of the following statement about exchange is false?
if one trading partner gains, the other must lose
When the price of oil rises, consumers economize by buying ________ and by ________.
less oil' finding substitutes
Firms earn negative profit when price is:
less than average cost
An external benefit in a market will cause the market to produce
less than is socially desirable
The locovore movement encourages eating locally produced food to reduce the greenhouse gases emitted from transporting food long distances, placing upward pressure on local land prices as farmland becomes more valuable. Which statement reflects what will likely occur as a result?
local forests become less common
Under rent control, tenants can expect:
lower rent and lower quality housing
If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the Pepsi-Cola Company could increase its total revenue by
lowering price
When economists say an individual has made a rational choice, they mean the individual has
made the choice by weighing their own subjective costs and benefits
Speculators:
move resources from periods of low-value use to periods of high-value use
In the presence of significant externalities, a market equilibrium maximizes:
nothing
a demand curve for concert tickets would show the
number of tickets purchased at various prices
Universities practice price discrimination by:
offering students different levels of scholarship support
The total economic cost of producing a good or service is called the
opportunity cost of production
Which of the following is always TRUE for monopolies?
p>mr
GlaxoSmithKline owns a government grant of temporary monopoly rights on the AIDS drug Combivir due to
patents
We see white t-shirts, identical except for the logo, selling for different prices. A white t-shirt with an small green duck on the pocket sells for twice the price of a t-shirt that has a small yellow bird. What are we to make of this as economists?
people must really value small green ducks over yellow birds
the difference between positive economic statements and normative economic statements is that
positive statements are based on fact while normative statements are based on opinion
A shortage occurs whenever
price is less than equilibrium price
Which one of the following goods would likely have the most inelastic demand?
salt
The demand curve for a good is very unlikely to be perfectly vertical because
scarcity and limited income restrict the ability of consumers to afford goods as they become very expensive and as the price of a good rises to high enough levels, the incentive for other suppliers to invent new substitues for the good increases
The unintended consequences of an economic change that are not immediately identifiable but are felt only with time are known in economics as
secondary effects
Millions of producers working across the world cooperate to ensure that many more millions of consumers can have the goods and services they desire. These producers do not know each other and are not coordinated by a central agency. Their actions are directed simply by:
self-interest
Price discrimination is:
sometimes better and sometimes worse than single pricing
Consumers are ________ with price discrimination than with single pricing.
sometimes better off
A monopoly is a firm
that sets price above marginal cost without concern that other firms will enter the industry.
The incentive to dedicate private resources to maintaining a common resource is low because:
the benefits of maintenance are external, not private benefits
in economics, the term marginal refers to
the change or different between two alternatives
How will a reduction in the price of cotton influence the market for blue jeans?
the cost of producing blue jeans will fall, and the supply curve for blue jeans will shift to the right
When economists say the demand for a product has increased, they mean the
the curve shifted to the right
When economists say the demand for a product has decreased, they mean
the demand curve has shifted to the left
Hutch Technology makes computer monitors, which sell for $500 each. What is the opportunity cost of producing ten monitors?
the other goods that could not be produced with the resources that produce the ten monitors
each point on the demand curve indicates
the quantity demanded at that price.
the market price of good x is 10.75 and every time good x is consumed it creates an external benefit of 3.00. therefore which statement is correct?
the social benefit of good x is 13.75 a justification for the government to give buyers a 3.00 subsidy
In economics the term utility refers to
the subjective benefit or satisfaction a person expects to receive from a choice or course of action
When economists say the supply of a product has decreased, they mean that
the supply curve has shifted to the left
Because Colgate owns patent number 5,547,091, only Colgate sells toothpaste with a flip-top cap, while others use the more traditional screw top. A patent probably wasn't a necessary incentive for Colgate to develop the flip-top cap, so why did it patent the cap?
to establish market power
The amount of money that the firm pays for its inputs is called:
total cost??
The total amount of money that a firm receives from sales of its output is called:
total revenue
Profit is defined as:
total revenue minus total cost
Price discrimination is considered bad when:
total surplus decreases
A monopoly can be defined as a single firm in a given market.
true
A monopoly is a firm with market power, and market power may arise from economies of scale, patent protection, and innovation.
true
Firms in competitive industries should adhere to: 1) expanding output if MR > MC, and 2) reducing output if MC > MR.
true
Hewlett Packard's pricing scheme is to sell printers at relatively low price and ink cartridges at relatively high price. This practice is known as:
tying
The difference between tying and bundling in pricing strategies is that:
tying does not require the purchase of both goods, but bundling does
Markets coordinate output decisions by pushing
up price when there is a shortage.
Price ceilings do not have much effect:
when prices are at or below the ceiling
a movement along a demand curve
is the result of a change in the price of the good
If the market wage for electrical engineers in the United States is $50 per hour, then we know that the marginal product of electrical engineers is:
at least $50 an hour
The price elasticity of demand for a commodity is determined primarily by the
attractiveness of the substitutes for the good
If coffee and cream are complements, an increase in the price of coffee will cause
demand for cream to fall
If a single supplier produces such a small portion of the total market output that changes in its production have no impact on the overall market price,:
demand for the firms output is perfectly elastic
Private property rights involve
-the right to exclusive use of the property. -legal protection against those who would seek to use or abuse the property without the owner's permission. -the right to transfer, sell, exchange, or mortgage the property.
If the price of coffee falls by 10 percent and the quantity supplied of coffee falls by 1.5 percent, then the elasticity of supply of coffee is:
.15
Firms in competitive industries: I. can only charge a price equal to the market price. II. cannot charge any more than the market price. III. will earn less profit if they charge less than the market price.
1,2,3
If the price of Good Y falls from $10 to $8, and the quantity supplied of it falls from 1,000 units to 600 units, the price elasticity of supply is:
2.25
Without taxes, the market price per bag of apples is $5. With a $2 tax per bag of apples, buyers now pay $5.75 per bag. What is the final price per bag of apples received by sellers?
3.75
Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is - .25, by how much would you have to raise the price of water?
40%
Street lights are an example of a good that is:
nonrivial and nonexcludable
the price of a good will tend to fall when
there is excess supply of the good.
If the United Auto Workers union can obtain a substantial wage increase for auto workers, there will be
a decrease in the supply of automobiles, which is a shift to the left go the supply curve
In a constant cost industry, P = AC = $20. Which sequence of events follows an increase in demand?
P > AC, firms make an economic profit, existing firms expand output, new firms enter the industry, the short-run supply curve shifts right, price falls until profits return to $0
To maximize profit, a firm in a competitive market increases output until:
P=MC
Harold, a delivery man, washes and irons his own shirts. Sarah, his boss, sends her clothes to a laundry. Which is the most plausible economic explanation for this difference?
Sarah has a higher opportunity cost of laundering her clothes than Harold does.
A retail outlet sells bottled water. Which scenario would cause them to use a "buy low and sell high" strategy with bottled water?
a hurricane is expected to arrive within one week
It always seems like the PRT always breaks down when you are on the way to an important test. What is the bestexplanation for this relationship?
The PRT breaks down occasionally. You are more likely to remember those breakdowns when they are associated with important and stressful things in your life, like exams.
When an industry becomes monopolized:
The losses to consumers are typically greater than the gains to the monopolist
Which of the following is an example of a normative economic statement?
The minimum wage should be increased so that low income workers can afford to keep up with the cost of living.
Land used to grow corn can also grow soybeans. As the demand for corn used in ethanol began to increase the price of corn, what happened to the price of soybeans?
The price of soybeans rose since farmers began planting corn instead of soybeans, thus decreasing the supply of soybeans.
Elaine, a small grocer, is planning to cut certain prices to increase her sales revenues. What will be the likely result of a price decrease for matches, a good for which the demand is inelastic, and a price decrease for fresh green tomatoes, an item for which consumer demand is elastic?
The total revenue derived from matches will decline, but total revenues derived from tomatoes will increase.
Truck drivers who drive on the ice roads in Alaska and Canada (like those on Ice Road Truckers) earn:
a compensating wage differential
cold snap in Florida destroys one-third of the orange crop in the United States. How would this be reflected in our supply curve analysis?
a decrease in supply
Which of the following events would result in an increase in equilibrium price and an uncertain change in equilibrium quantity?
a decrease in supply and an increase in demand
A compensating differential is:
a difference in wages that offsets differences in working conditions
Which of the following would lead to an increase in the demand for fast food in Morgantown?
a doubling of morgantown population
he Edict on Maximum Prices, established by the Roman Emperor Diocletian, created price ceilings on various jobs and goods in a failed effort to curb inflation. For example, legal pay for a farm laborer could be no more than 10.8¢ a day (payment set in modern currency). If the market rate of farm labor was 12¢ a day, which would be a plausible consequence of this law?
a laborer would work less hard than he otherwise would
When economists say the demand for a good is highly inelastic, they mean that
a large percentage change in the price of a good will result in only a small change in the quantity demanded
The primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is
a larger output resulting from a more efficient use of resources
Which of the following would reduce the supply of tennis shoes?
a new tax imposed on the producers of tennis shoes
Which of the following would increase the supply of laptop computers?
a technological improvement that lowers the cost of producing laptop computers
Tying is:
a type of price discrimination
Arbitrage is ________ in one market and ________ in another market.
buying low; selling higher
The Gillette Fusion razor sells for approximately $10.00, and a four-set of replacement blades sells for over $8. Which of the following statements is TRUE? I. Consumers with a high willingness to pay for being clean-shaven will buy many replacement blades. II. Consumers with a low willingness to pay for being clean-shaven will rarely buy replacement blades. III. Gillette's high price for the replacement blades is a method to extract consumer surplus from those consumers with a high desire to be clean-shaven.
all
A good that takes up a very large percentage of the consumer's budget will tend to have
an elastic demand
Because rent controls on apartments reduce profits:
apartment managers will give less consideration to renters' complaints
After a severe hurricane in South Carolina, the price of electric generators quadrupled. People living outside of South Carolina purchased electric generators in their home states and drove them to South Carolina to sell at a much higher price. What is this an example of?
arbitrage
When an unusually bad frost reduces the apple crop in Washington state, the price of canned apple juice may rise immediately in supermarkets, even though the juice on the shelves was made from last year's plentiful crop. The invisible hand theory tells us that the profit-seeking merchants who raise their prices in such situations
are profiting by rationing the juice, which is now more scarce to the consumers willing to pay the most for the now more limited supply
if a good Is an inferior good, this implies that
as incomes rise, the demand for the good will fall??
Because the height of the demand curve measures the marginal value of the good to consumers, the fact that a demand curve slopes downward to the right illustrates that
as more of the product is consumed, consumers will value additional unites less
Which of the following explains why local supply tends to be more elastic than global supply?
as price increases in certain locale, goods can be brought in from other areas, which is not possible on a globale scale
If consumers would be willing to purchase the same quantity of a good no matter what its price was, the demand curve would
be a vertical line, indicating that demand is perfectly inelastic
Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because
buyers tend to be more sensitive to change in price when given more time to react
In which statement(s) are "supply" and "quantity supplied" used correctly? (I) "An increase in the price of computers will increase the quantity supplied of computers." (II) "A technological advance that lowers the cost of producing computers will increase the supply of computers."
both
How do speculators mitigate shortfalls in the equilibrium quantities traded in markets?
by buying up items in advance of rising prices, and then selling them in the market when prices increase
In general, wages are determined:
by the skills of the worker and the productivity of the entire economy.
Economists call the maximum legal price a price ceiling because the price:
cannot higher than the ceiling
A tax on the seller of a product:
causes the supply curve for the product to shift to the left.
A legal maximum price at which a good can be sold is a price:
ceiling
When the maximum legal price is below the market price we say that there is a price:
ceiling
Which of the following is NOT an example of bundling?
cell phones and phone calls
One of the biggest problems with centrally planned economies is that:
central planners have limited information on the true value of the various ways to utilize scarce resources
For which one of the following goods would you expect the demand to be most elastic?
chevrolet automobiles
If an increase in the price of peaches reduces the demand for cream, this indicates that peaches and cream are
complements
A private owner of a resource has a strong incentive to
conserve the resource for the future, particularly if it is expected to increase in value
Which of the following statements is TRUE?
consumer surplus under competition is greater than consumer surplus under monopoly
When labor demand decreases, the wage is expected to:
decrease
Nobel Prize-winning economic historian Douglass North argues that:
economic growth was slow until patent laws were created to protect innovation
An industry is said to be perfectly competitive when:
each firm has virtually no influence over the price of its product
It is Valentine's Day in the United States, and you give your lover one dozen roses that were freshly picked 72 hours ago from the fields of Kenya. What made this gift possible?
economic markets
When competition is present and property rights protected and enforced, market prices wil
encourage self-interested individuals to develop skills that are expected to be valuable in the future
Free riders are people who:
enjoy public goods without paying for them
A new study on the health benefits of vitamin C has caused more people to prefer orange juice. At the same time, a freeze in Florida has devastated the orange crop. Given these two effects, what can we say about the equilibrium price and quantity of orange juice?
equilibrium price will increase, the effect on quantity is ambiguous
An add in the newspaper claims that the price of milk will increase next week. At the same time, a new and improved pasteurization process makes milk production more efficient. Given these two effects, what can we say about the equilibrium price and quantity of milk?
equilibrium quantity will increase; the effect on price is ambiguous
In many cases, competitive markets help promote the efficient use of resources
even when each market participant cares only about their own self interest rather than about the overall efficiency of resource use
Suppose that a war in the Middle East makes oil increasingly scarce. Oil usage should:
fall the most in low-value uses
If the price elasticity of supply is 0.75, then when the price of Good Y falls by 10 percent, the quantity supplied of Good Y:
falls by 7.5 percent
If cable television operators did not practice bundling, we would most likely see:
fewer cable television stations
The demand for which one of the following will be most inelastic?
food products
The demand for which one of the following is most likely to be highly elastic?
fresh green spinach
High prices charged by monopolists will cause the monopolists':
gains to be less than the lost consumer surplus
Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of trees the woodpeckers like to nest in. This is an example of which of the following?
good intentions do not always lead to desirable outcomes
To maximize profit, firms should keep producing as long as marginal revenue is:
greater than marginal cost
"Bill Gates has made billions of dollars producing and marketing computer software. Many workers and consumers must have suffered in order for Gates to amass such enormous wealth." The person who made this observation
has failed to understand that voluntary exchange generally results in mutual economic gain
A restaurant offers an "all you can eat" lunch buffet for $12. Jim has eaten three servings and is trying to decide whether or not to go back for a fourth. The economic way of thinking suggests that Jim should go back for the fourth serving if and only if
his marginal benefit of the additional serving is greater than zero
The economic way of thinking stresses that:
incentives matter--individuals respond in predictable ways to changes in personal costs and benefits.
Suppose speculators expect that the supply of oil will decrease next year and as a result, buy up oil today and put it into storage. This should cause the value of that oil to:
increase
Nobel Prize-winning economist Edmund Phelps's plan to institute wage subsidies would:
increase employment
If people expect the price of coffee to rise next month, the demand for coffee will
increase now
A wage subsidy would:
increase the demand for labor, increase the wages received by workers, and lower the wages paid by firms
We often think of technology and labor as substitutes for each other, but technology can lead to the hiring of more labor if it:
increase the marginal product of labor
conomic theory suggests that permanent gun buyback programs: A.make guns less valuable.B.increase the number of guns in circulation.C.increase the quantity of low-quality guns in circulation but decrease the quantity of high-quality guns in circulation.D.succeed in reducing the number of guns in circulation.
increase the number of guns in circulation
A decrease in the price of a good would
increase the quantity demanded of the good
if the demand for a good is elastic, then total revenue
increases as price decreases
If the price of cocoa rises by 10 percent and the elasticity of supply is 0.5, then the quantity supplied:
increases by 5 percent
Saudi Arabia has market power in the world's oil markets because:
it controls a significant fraction of the worlds oil supply
If price rises, what happens to the quantity demanded for a product?
it decreases
what happens to consumer surplus if the price of a good increases?
it decreases
Price discrimination is considered bad when ________, but good when ________.
it decreases output, it increases input
if price rises, what happens to quantity supplied of a product?
it increases
In order for a firm to successfully use tying,:
it must be difficult for other firms to sell the second good
Which of the following statements about monopoly power is correct?
monopoly power is the power to raise prices above average cost without facing new entries of firms
Evidence from the Sudan indicates that the supply of slaves is likely: A.perfectly elastic.B.perfectly inelastic.C.more inelastic than elastic.D.more elastic than inelastic.
more elastic than inelastic
Pfizer sells Atgam in New Zealand for $14 per pill and in Brazil for $8 per pill. This implies that the demand curve in New Zealand must be ________ than in Brazil.
more inelastic
According to the law of supply,
more of a good will be offered by suppliers as the price rises
The influence of the minimum wage in the American economy is very small because MOST workers earn:
more than the minimum wage
Why are there more births in the United States in late December than in early January?
parents get a tax deduction if babies are born before the year end
An external cost is a cost paid by:
people other than the consumer and the producer trading in the market
When economists say that people choose rationally, this means
people respond in predictable ways to changes in costs and benefits
The price elasticity of demand for a product tends to be large (more elastic) when
people spend a large share of their income on the product
Which of the following suggests that the "laws" of supply and demand are being disobeyed?
persistent shortages or surpluses occur
When a pharmaceutical company discovers a new drug, patent law gives it market power by guaranteeing:
sole ownership of the right to sell the drug for a limited number of years
A rent control is a regulation that:
prevents rents from rising to equilibrium levels.
If the demand for a product increases as the result of a decline in income, it can be concluded that the
product is an inferior good
Adam smith believed that if people were free to pursue their own interests
public interest would be served quite well
When the price of pizza increases, consumers have an incentive to:
purchase substitute goods, such as Chinese food
If equilibrium is present in a market,
quantity demanded equals quantity supplied
In situations of excess demand, sellers might lower quality when they are unable to raise prices because they wish to:
raise their profit levels
A successful advertising campaign would likely
reduce price elasticity of demand by stressing the uniqueness of the product
A tax on sellers of popcorn will:
reduce the size of the popcorn market.
If Homer operates a small bakery and sells donuts for $4/dozen, he should:
sell an additional dozen of donuts as long as the marginal cost of producing an additional dozen donuts is less than $4
Which one of the following statements about subsidies is NOT correct?
subsidies always increase the gains from trade for producers
Which statement is NOT an effect of a price ceiling
surpluses
The maximum price that consumers are willing to pay for the hundredth unit of a good can be found as
the height of the demand curve at a quantity of 100
The equilibrium price in the market represents the:
value of the good in its next highest-valued use
If the price of aluminum increases 4 percent, and the quantity supplied increases by 1 percent, what is the price elasticity of supply?
.25
An example of a monopoly would be:
a sole provider of electrical power in a city.
It has been said that all economists share a common ground. What is this common ground?
a theoretical framework based on the premise that incentives influence behavior in a predictable manner
For a price floor to prevent market forces from finding the equilibrium price, it must be set:
above the equilibrium price, causing a market surplus
Workers earn higher wages: I. when the demand for labor rises in an industry. II. the greater the amount of human capital market issues they possess. III. the more dangerous the job they perform.
all
An important assumption that is made when constructing a supply schedule is
all other determinant of supply are held constant
Suppose your city has had an increase in crime and the city government decides that more police are needed to patrol at night. Which of the following funding solutions avoids the free-rider problem involved with additional police officers?
an increase in the city sales tax
The market wage of computer programmers is determined by:
an upward sloping supply curve of labor and a downward sloping demand curve for labor
in economics, the demand for a good refers to the amount of the good people
are willing to buy at various prices
When wages decrease, firms will hire more workers who will be:
assigned to the least important tasks
A high demand for labor in one industry will:
attract workers from another industry
Which of the following is true?
changes in personal costs and benefits will exert a predictable influence on the choices of people
If an airline company has several empty seats on a flight and the full price of an air ticket is $500 and the marginal cost per passenger is $100, then it will be profitable for the airline to
charge a stand-by passenger more than $100
If people buy less chewing gum at every price when their incomes fall, then
chewing gum is a normal good
There are more guns in the United States than people. In an attempt to reduce the number of guns and therefore gun-related violence, many cities have gun buy-back programs, where they offer individuals gift cards or cash for their guns. Which of the following actions by citizens is most likely to undermine the purpose of the program, consistent with the idea of unintended consequences?
citizens trade in old guns and use the gift cards or cash to buy a new one
Of the following goods, which is most likely to have the lowest (most inelastic) elasticity of demand?
coffee
The market solves the information problem when allocating resources by:
collapsing all the relevant information about uses of the good into its price
Economic theory suggests that college graduates receive higher wages than those with only a high school education because:
college graduates are more productive
During the Middle Ages, many villages had areas reserved for families to take their cows or sheep to graze. All families were welcome to use this land without charge. The land for grazing can be characterized as a:
common resource
Lawyers who work at law firms tend to work very long hours and must be available for their clients at any time, day or night. Lawyers who work as public defenders, on the other hand, work hours that are more normal. What idea suggests that lawyers who work at law firms will earn more than public defenders on average?
compensating differential
In 1986, the price of coffee increased sharply because of a major earthquake and weather-induced crop failures. As a result, conservation was immediately practiced mainly by those consumers who
considered the prices of products when they made decisions about buying them
A demand curve shows the relationship between price and quantity demanded, other things constant. These "other things" include which of the following?
consumer preferences, the price of substitute goods, consumer income
the difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called
consumer surplus
A good is classified as inferior if
consumers buy less when income rises
The market is effectively able to allocate goods to their highest-valued uses because:
consumers will only purchase the good if its value is greater than its price
The market solves the incentive problem when allocating resources because the:
consumers will pay for the good if its value of use is greater than the price
Workers in Peru collect cochineal bugs used to dye certain United States food items red. Market activities such as this one can best be described as:
cooperative, voluntary, and undirected
The "law of comparative advantage" suggests that
countries will tend to export commodities that they can produce at a relatively low opportunity cost and curtailing trade with other countries would make us consumers worse off
The supply of nurses in country A is the same as the supply in country B, but the nurses in country A earn 90% more than the nurses in country B. What can explain this difference?
country A's economy is more productive than country B's, so the demand for nurses is higher in country A
Futures markets are common in commodities, financial instruments, and:
currencies
Bundle pricing makes sense for cable operators because:
customers have a high willingness to pay for some channels and a low willingness to pay for others
If salsa and nacho chips are complements, an increase in the price of nacho chips would
decrease the demand for salsa
In Morgantown, when most students go home for the summer, the demand for many items such as pizza and beer
decreases, which is a shift to the left of the demand curves for these goods
The demand for which one of the following goods is most likely to be quite inelastic?
defense lawyer
The curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price is the
demand curve
Assume that eggnog and Christmas cookies are complements. If the price of eggnog goes up, what happens to the demand for Christmas cookies?
demand for cookies decreases
Monopolies will have more market power when one firm owns an input that is difficult to duplicate and the:
demand for the product is inelastic
When a shortage occurs in the market for a good, quantity
demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption
In Puerto Rico in 1938, the market wage was 3¢ to 4¢ per hour when Congress passed a law raising it to 25¢ per hour. Workers in Puerto Rico were:
devastated
When property rights are clearly defined and enforced, private owners will
develop and direct their property toward uses that others value highly because the market will generally reward them for doing so
Economic theory suggests that gun buyback programs: A.do not reduce the number of guns on city streets.B.reduce the demand for new and better-functioning guns.C.are most effective if the supply curve of guns is perfectly elastic.D.are effective in reducing the number of guns on city streets.
do not reduce the number of guns on city streets
Which of the following best illustrates a product sold in a perfectly competitive market?
eggs
If Pizza Al's reduces its pizza prices by 15 percent, and as a result, its total revenue from pizza sales increases, this indicates that the price elasticity of demand for the firm's pizza was
elastic
If the price of tickets to Disney World increases 10 percent, and as a result, attendance falls by 15 percent, the demand for the tickets is
elastic
Suppose Microsoft announces it is cutting the prices of some of its software titles (mainly games) by 25 percent. Assuming that Microsoft is seeking to increase revenues, it must believe that the elasticity of demand for these products is
elastic
Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he
has mistakenly inferred causation from observed correlation
which of the following was a key belief of Adam smith?
he believed that individuals pursuing their own interests would direct economic activity in the most advantageous way
The demand for which one of the following is most likely to be highly inelastic?
health care services
Speculation often:
helps smooth price fluctuations
Which of the following statements is TRUE?
high profits in an industry give entrepreneurs an incentive to enter that industry
Suppose the WVU athletic department wanted to increase revenues by decreasing ticket prices to football games. This would make sense only if the price elasticity of demand for football games was (in absolute value)
greater than 1
Firms are profitable when price is:
greater than average cost
A firm is willing to hire a worker when the marginal product of labor is:
greater than the wage
A firm will hire workers as long as the marginal product of labor is:
greater than the wage
The greater the price elasticity of demand, the
greater the responsiveness of quantity demanded to a change in price.
The wages of office cleaners in the United States are ________ than the wages of office cleaners in India because ________.
greater; American offices are more productive, hence more valuable to keep clean
Assume that black beans and rice are staples in the diet of one particular family. How could you tell if these goods were complements, substitutes, or unrelated goods?
if the price of black beans rose and the consumption of rice increased, they would be substitutes
In an effort to decrease carbon emissions in California, the state government decided to implement a car buyback program in order to decrease the number of cars on the streets. The California government would offer a $2,000 tax rebate for each car turned in. The cars would then be demolished and the steel recycled. Under what conditions would a program like this succeed at significantly decreasing the number of cars driven in California? A. If the supply elasticity of new automobiles globally was inelastic. B. If the supply elasticity of automobiles in California was inelastic. C. If the supply elasticity of automobiles in California was elastic. D. If the supply elasticity of new automobiles in California was inelastic.
if the supply elasticity of cars in California was inelastic
If the price of output in an industry rises, firms in that industry will ______ labor.
increase their demand for
Which of the following observations is consistent with the law of comparative advantage?
gwen is a highly paid lawyer, she can type 80 words per minutiae but still hires someone who can type 50 words per minute
John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct?
harry has a comparative advantage in ironing
If Harry is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have sold the crop for as little as $20,000, this indicates that
harry received 5000 of producer surplus from the transaction
A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91. The administration is considering a tuition increase to help balance the budget. The revenue-maximizing decision is to
increase tuition, which would generate more revenue?/?
If speculators expect that the future price of corn will be higher, they will cause today's price of corn to ________ and the future price of corn to be ________ than it would have been without speculation.
increase, lower
Over time, housing shortages caused by rent control ______ because the supply of housing is ______ elastic in the long run.
increase, more
If the number of consumers in a market increases, the market demand curve will
increase, which is a shfit to the right of the demand curve
For a typical product, an increase in consumer income will cause the market demand for the product to
increase, which is a shift to the right of the demand curve
An important lesson of price discrimination is that:
it only increases profits when the demand curves in two different markets are not the same
Why has the Earned Income Tax Credit (EITC) increased employment among single mothers?
it provides a certain amount of tax relief for all families with children
If price rises, what happens to the demand for a product?
it stays the same
If a single supplier produces a good with many good substitutes, then:
it will have little control over the market price
Because of aging requirements it takes many years to make good Scotch. If a technology were invented that made it possible to create good Scotch literally overnight, how would the short-run supply of good Scotch change?
it would become more elastic
What links the flower growers in Kenya with romantic American teenagers who give flowers as gifts of affection?
markets
Rising oil prices during the 1970s shifted flower production from California to Kenya. Which of the following answers explains this shift? A.Markets are linked to one another.B.The Kenyan flower industry is run by the California flower growers.C.No transportation costs exist for flowers.D.Rising oil prices decreased greenhouse heating costs in California, making it cheaper to grow flowers in warmer climates.
markets are linked to one another
If Matt trades two candy bars to Andy in exchange for one baseball card,
matt must have valued the baseball card more than the two candy bars and Andy must have valued the two candy bars more than the baseball card
Price ceilings would create all of the following effects EXCEPT:
maximum gains from trade
Modern theories of economic growth emphasize that monopolies:
may sometimes be necessary for innovation and economic growth
The tragedy of the commons refers to the:
overuse of a rival but nonexcludable good.
Mosquito control is an example of a good that:
people still get to enjoy even without paying for it, that is a nonexcludable good
Price discrimination can be defined as:
selling the same product at two different prices in two different markets.
Suppose there are two types of cable TV viewers. The first type places a high value on sports channels (e.g., ESPN, Fox Sports, and The Golf Channel) and a low value on all other channels. The second type places a high value on music channels (VH1, MTV3, and CMT) and a low value on all other channels. In this case, we would expect cable operators to:
sells sports and music channels in one bundle to both types of viewers
Firms in a perfectly competitive industry maximize profits by:
setting the price equal to the market price
Which of the following statements is TRUE regarding subsidy?
suppliers receive more benefit of a subsidy if the elasticity of supply is less than the elasticity of demand
If the price of a good is below the equilibrium price,
suppliers will find inventories being depleted. they will increase production and raise prices
suppose both the equilibrium price and quantity fall for a particular product. Which of the following best explains this situation?
supply and demand simultaneously decreased and the shift in supply was less than the shift in demand
Suppose both the equilibrium price and quantity rise for a particular product. Which of the following best explains this situation?
supply and demand simultaneously increase and the shift in supply was less than the shift in demand
When economists say the supply of a product has increased, they mean the
supply curve has shifted to the right
Although large parts of beef cattle become meat products, other parts become leather jackets. As the demand for beef rises, what happens in the market for leather jackets?
supply increases and price decreases
Gun buyback programs will be less effective if the: A.demand for guns is more elastic.B.demand for guns is more inelastic.C.supply of guns is more elastic.D.supply of guns is more inelastic.
supply of guns is more elastic
A decrease in the price of leather used to make shoes would cause the
supply of shoes to increase
Ethanol and sugar are both made from sugar cane, and ethanol can be used as a fuel substitute for oil. Increasing oil prices cause the demand for ethanol to increase. This will cause the ______ sugar to ______ and its price to ______.
supply of; decrease; increase
If an increase in oil prices made it profitable to use corn-based ethanol for fuel and corncobs are a waste product of ethanol production, what will happen in the market for corncob pipes?
supply will increase, prices will fall, and sales will increase
For which one of the following goods would you expect the demand to be most inelastic?
tacos
The difference between what buyers pay for a unit of a good and what sellers receive is known as the:
tax
It is possible for an individual to have a downward-sloping labor supply curve if:
the wage increases enough that a worker may decide to work less and enjoy the income
why do cotton growers spend billions of dollars to dam rivers and transport water hundreds of miles to grow cotton in California deserts?
the water used to grow California cotton is highly subsidized by the government
Which of the following statements is FALSE?
there is almost no return to getting more education beyond a bachelors degree
If the social cost of an activity equals the private cost, what kind of externality exists?
there is no externality
If a monopolist is able to perfectly price discriminate, then:
there will be zero deadweight loss to society
just before class, Jim tells Stuart, "Stuart, you shouldn't skip class today because you have paid tuition to enroll in the class." Stuart ignores Jim's advice, and instead makes the decision of whether to attend based on what he feels he'd be missing that day in class relative to his value of the extra time he could have to finish the video game he is playing. To an economist, Stuart is
using marginal decision making
The subjective benefit (or satisfaction) that an individual expects to derive from an activity is called
utility
Central planning of resource allocation:
was the dominant economic planning method used in both the former Soviet Union and china
Farmers can produce wheat and/or corn. What will happen in the wheat market if there is an increase in price of corn?
wheat supply will decrease
For a monopolist, MR is always less than P because
when a monopolist lowers the price to sell more units, it must lower the prices of all units sold.
A decrease in the demand for a good sold in Market A:
might effect other markets, even those halfway across the world
Sarah, a wheat farmer, is deciding whether or not to add fertilizer to his crops. If he adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, Harry should add fertilizer if it costs less than:
$20 per pound
If admission to a Beyonce concert in a football stadium is lowered from $60 to $40, and attendance increases from 25,000 to 35,000, the price elasticity of demand for attending the concert is approximately
-.83
If a 20 percent reduction in the price of airline tickets between Chicago and New York leads to a 50 percent increase in the quantity of tickets purchased, the price elasticity of demand for the tickets is
-2.50
If the price of oil increases from $80 to $90 per barrel, the quantity supplied increases from 100 to 105 million barrels per day. What is the price elasticity of supply using the midpoint method?
.41
Which of the following statements is FALSE? I. If the demand curves are different, it is more profitable to set a single price than different prices in markets. II. To maximize profit the firm should set a lower price in markets with more elastic demand. III. The presence of arbitrage makes it easy for a firm to price discriminate.
1 and 3
Shannon buys a new satellite radio for her car for $135. She receives consumer surplus of $25 on her purchase if her willingness to pay is
160
In which statement(s) is "supply" used correctly? (I) "An increase in the price of eggs will increase the supply of eggs." (II) "As the cost of producing eggs rises, the supply of eggs will tend to fall."
2
Which of the following statements is TRUE? I. A $0.50 tax on each fishing lure sold raises the price per lure by $0.50. II. A tax on sellers is equivalent to a tax on buyers. III. A tax on buyers is analyzed by shifting the demand curve up by the amount of the tax.
2
A market is considered perfectly competitive if: I. there is a lot of product differentiation among sellers. II. there are many sellers, each small relative to the total market. III. the product sold is similar across sellers. IV. there are only a few buyers.
2 and 3
Which of the following statements is TRUE? I. Overfishing results from fish being privately owned by profit-maximizing firms. II. If a fisherman catches a lot of fish, he creates a negative externality because there are less fish to catch for everyone else. III. There is no incentive for an individual to fish less simply to leave more fish for everyone else to catch. A.I onlyB.II onlyC.I, II, and IIID.II and III only
2 and 3
Why is national defense a public good? I. It is expensive to produce. II. People who don't pay for national defense still benefit from having it. III. One person's benefit from national defense doesn't reduce anyone else's benefit from it. IV. It is provided by the government.
2 and 3
The marginal revenue ( MR) for a firm is a constant $45, and the firm's marginal cost ( MC) is given by MC = 1.5 Q (where Q is quantity of output). What is the firm's profit-maximizing level of output?
30
Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendras's willingness to pay was $95, and Kristen's willingness to pay was $80. Consumer surplus for the three individuals combined is
35
Which of the following statements is correct? A.If the elasticity of demand is greater than the elasticity of supply, sellers will receive more of the subsidy.B.If the elasticity of demand is greater than the elasticity of supply, buyers will receive more of the subsidy.C.If the elasticity of demand is greater than the elasticity of supply, sellers will receive less of the subsidy.D.If the elasticity of demand is less than the elasticity of supply, sellers will receive more of the subsidy.
A
Which of the following is true regarding the price elasticity of demand?
Demand is generally more elastic in the long run than in the short run. b. Along a single demand curve, demand elasticity decreases as you move down the curve (to lower prices). c. A demand curve that is flatter (has a less steep slope) is relatively more elastic than a demand curve that has a steeper slope.
Which of the following is most consistent with economizing behavior?
Even if you know how to paint, hiring someone to do the job is consistent with economizing behavior, if your opportunity cost is high enough
Which of the following is a statement of positive economics?
Government control of rent decreases the number of new apartments constructed.
Which one of the following statements most accurately indicates the basic motivation for behavior?
Individuals are motivated by a variety of forces; however, changes in personal benefits and costs influence the choices of both selfish and humanitarian individuals.
How does price discrimination increase social surplus?
It expands the output that a firm would otherwise product
Wearing costumes at Halloween is largely a Western custom. In China, the Halloween festivals are very different in that they involve more of the presentation of gifts and food to family members and others that have passed away. Which statement is a reasonable explanation for why the Western market for Halloween costumes might be important for Chinese firms and factories? A.Knowledge of the Western Halloween festival and demand for costumes can translate into profits for Chinese producers who can produce such costumes at lower costs.B.Chinese producers can try to market Chinese festivals to American consumers.C.The West can export costumes for the Chinese to wear during their Halloween Festivals.D.The costumes that the Chinese do not use during their festivals can be exported to the West.
Knowledge of the Western Halloween festival and demand for costumes can translate into profits for Chinese producers who can produce such costumes at lower costs.
In the long run, demand is ______ the short run.
More elastic than in
Because information is costly to acquire,
People will rationally choose not to become fully informed when making decisions.
Which of the following is a normative statement?
People would be better off if government expenditures were higher.
Which of the following statements is TRUE about price discrimination? A.Price-discriminating monopolists often produce more output than single-price monopolists and increase total surplus in the process.B.Price discrimination leads to deadweight loss and therefore makes the market less efficient.C.Price discrimination is illegal in the United States.D.Price discrimination makes consumers worse off due to higher prices.
Price-discriminating monopolists often produce more output than single-price monopolists and increase total surplus in the process
Which statement illustrates the concept of external cost?
Raymond cannot open his windows at times because he lives downwind from a mushroom farm
Brazil is the world's largest sugar cane producer and sugar cane can be used for producing sugar and the fuel ethanol for automobiles. Which sequence of events is correct?
Rising oil prices cause Brazilian producers to shift sugar cane production from sugar to the fuel ethanol. The decrease in sugar supply raises the price of candy bars
the law of comparative advantage explains why
Specialization and exchange will make it possible for trading partners to expand their joint output.
Which is an example of an external benefit?
Your neighbors fix up their homes, which raises property values on the entire street.
Fishermen who go deep-sea crab fishing (like those on The Deadliest Catch) earn:
a compensating wage differential
Which of the following would most likely increase the demand for televisions?
a decrease in the price of streaming services such as Netflix, a product that is complementary with televisions
When individuals reap the benefits of choices that increase the value of their resources and bear the costs of choices that reduce the value of their resources, decision makers have
a strong incentive to search for more efficient ways of using the resources
The most fundamental concept in economics is that
changes in incentives influence behavior in a predictable way--people will be less likely to choose an option as it becomes more expensive.
Newly formed trade unions raise wages for workers in Country X, where cars are manufactured. The higher wages increase the costs for the car manufacturers, who then relocate to Country Y, where labor costs are lower. Car manufacturing begins to thrive in Country Y relative to Country X. Which answer BEST describes the concept highlighted by this scenario?
changes in one market can affect markets and people in other regions of the world
Which would NOT happen as the result of a price floor?
decreases in product quality
Which of the following is NOT a source of monopoly power?
decreasing marginal costs
Some researchers estimate that all saltwater fish will be extinct by 2048, in large part due to overfishing. But surveys also show that more households eat chicken and beef than fish; however, neither chickens nor beef are in danger of extinction. Which of the following best explains these observations?
fish tend to be non excludable resources, whereas chicken and beef are excludable
Bundling can increase efficiency especially when:
fixed costs are high and marginal costs are low
Suppose a city that operates local electric and natural gas companies wants to raise revenues by increasing its rates for electricity and natural gas. The price rise will increase city revenues if the elasticity of demand for electricity and natural gas is
inelastic
Which of the following is NOT a source of monopoly power?
inelastic demand for the product
Prices direct economic activity in a market economy by
influencing the actions of buyers and sellers
The opportunity cost of an alternative
is subjective and can only be determined by the person who chooses the alternative
Because there are external benefits from higher education:
private markets will undersupply college classes
Using scarce resources to meet one need __________ our ability to meet needs in other areas.
reduces
The individual supply curve for labor:
starts sloping up and then bends back as wages rise.
The price controls of the early 1970s caused:
the disappearance of the full-service gas station
Tying is
the practice of a firm selling one product that requires the consumer to purchase another of the firm's products.
the current demand for a good would decrease if
the price of a complementary good rose
At a price ceiling of $6 per sheet of drywall, quantity demanded is 100 and quantity supplied is 75. What will happen in the drywall market if there is an increased demand for drywall in the construction industry?
the shortage of drywall will increase above 25 units
Small tribes may be able to solve the tragedy of the commons by:
using social norms to punish and ostracize those that overuse a common resource
A firm practices price discrimination by selling at a high price in its larger market, Market A, and a lower price in its smaller market, Market B. If this firm is forced to sell at a single price in both markets and opts for the original price in Market A, the new single-pricing strategy makes consumers in:
market A no worse off but consumers in market B worse off
If consumer tastes are changing more in favor of the consumption of a particular good the
market demand curve would shift to the right
When external benefits are significant:
market output is too low
The power to raise price above marginal cost without fear that other firms will enter the market is:
market power
Which of the following statements is TRUE?
market power may result from government regulations or patent protection
When external costs are present in a market:
market prices send incorrect signals.
Which of the following is NOT a source of monopoly power?
marketing
Noah drinks Dr. Pepper. He can buy as many cans of Dr. Pepper as he wishes at a price of $0.50 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Noah is rational in deciding how many cans to buy. His consumer surplus is
$0.85
Damien produces 400 gallons of milk a day in a very competitive industry. The market price for a gallon of milk is $2. Damien's marginal revenue per gallon of milk is:
$2
Why do similar jobs have similar compensation packages? I. The law of demand and supply will ensure that the salaries will be similar over time. II. Wages and "fun" adjust between jobs until compensation packages are similar. III. Because exactly the same skills are being applied.
1 and 2
Which of the following statements is TRUE? A tax and subsidy are similar in that: I. they both create a deadweight loss. II. the burden of the tax and benefit of the subsidy depend on relative elasticities of demand and supply. III. they both change the equilibrium level of output.
1 and 2 and 3
Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of demand for the dolls over this range is
2.5
Susan wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Susan, the marginal cost of the tenth gallon of gasoline is
50 cents
Julia knows the price elasticity of movie rentals is 3. She knows, therefore, that if she raises her price from $2 to $2.50, her rentals will drop by approximately
66 percent
In a constant cost industry, the market price and average cost are equal to $23. Therefore, which of the following is correct?
An increase in demand will cause the short-run price to rise above $23, but in the long run, the price will return to $23. B.A decrease in demand will cause market price to fall below average cost and thus firms will earn negative profits. An increase in demand will cause profits to rise and firms to enter the industry until profits return to normal.
Higher oil prices represent higher energy costs in general across the economy leading to increased use of bicycles and public transportation. Which answer BEST describes the idea that changes in one market can produce effects in previously unseen markets?
Increased bicycle demand increases the demand for rubber to make bicycle tires. Farmers in Southeast Asia switch from rice to rubber production and the price of rice increases.
Workers in many foreign countries such as India are paid much less for work that is very similar to the work done by workers in the United States. One reason for this is that:
India is a less productive economy
Statistical data provided by the U.S. Department of Transportation shows that the median income of individuals traveling on the nation's bus systems is $18,000 compared to $65,000 for those who normally travel by air. This finding is best explained by which of the following statements?
Persons with high income are more likely to fly because the opportunity cost of their time is generally higher than those with lesser income
Does voluntary exchange create wealth (value)?
Yes, because both parties gain more of what they value
Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts?
a decrease in the price of wool shirts and a decrease in the price of raw cotton
If a seller facing excess demand is unable to raise the price of the good due to a price ceiling, a likely result will be:
a decrease in the quality of the product
If a major hurricane were to destroy the sugarcane crop in Louisiana, there would be
a decrease in the supply of sugarcane
Compared with a similar job that requires little human capital labor market issues, a job that requires a large amount of human capital labor market issues will likely pay:
a higher wage rate
assume the demand schedule for cookies is downward sloping. if the price of cookies falls from $1.50 to $1.25 per dozen,
a larger quantity of cookies will be demanded
To better feed his army, Napoleon established a technology prize that led to the development of canning in 1809. Napoleon required the inventor—Nicolas Francois Appert—to publish the method. Napoleon's reign as Emperor ended after his defeat at Waterloo, a defeat which might not have been so decisive had canned food not made its way to the enemies' mouths. By demanding Appert publish his method, what did Napoleon force Appert to give up?
a monopoly
In Chicago's Southside (and other places), auto mechanics (who work outside the formal sector, without a business license, advertising, or even a garage) will do work for gang members without charging them. In exchange, gang members chase away other mechanics who wish to operate in the area. These auto mechanics have monopoly power; what type of source does it come from?
barriers to entry
Tying is a form of price discrimination in which one good called the ________ is tied to a second good called the ________.
base good, variable good
In economic development, "brain drain" refers to the tendency of a developing country's most skilled workers leaving to work in a wealthy country. Why can skilled foreign workers from poor countries make so much more money in wealthy countries?
because the demand for skilled workers Is higher in wealthy countries
"As soon as I announced my 'get tough on crime' policy, criminals got scared and the crime rate went down." Suppose that the lower crime rate was actually caused by freezing cold temperatures in January—it was just too cold for anybody to be out robbing other people. Which fundamental economic mistake did the politician make?
believing that association is the same as causation
A subsidy will cause the biggest deadweight loss when:
both supply and demand are elastic
Disneyland sells goods that are largely:
bundled
In The Beautiful Tree, Dr. James Tooley describes how he found, in developing country after developing country, countless private schools aimed at educating the poor's children. The schools are completely self-funded, relying on tuition to pay salaries and upkeep. Although the teachers are effective, the schools are very basic: large playgrounds and modern building construction are very rare. Based on this information, what is the elasticity of the supply of schools?
elastic because these schools are relatively easy to establish
The central planning approach proved ________ because ________.
failure; central planners lack information and incentives to allocate resource efficiently
"If Tom had twice as much money, he could consume twice as much. If everyone had twice as much money, they could consume twice as much." This quote is an example of correlation not causation.
false
Average total cost is equal to total cost divided by profit. True False
false
Firms have less pricing power if their firm-level product is more unique.
false
Human capital refers to tools like computers and telecommunication.
false
Low-rise construction workers are expected to be paid more than high-rise construction workers.
false
Music is a relatively enjoyable profession, a factor that raises the wage for musicians.
false
The market for designer jeans is a good example of a perfectly competitive market.
false
How can selling a futures contract mitigate agricultural risk for farmers?
farmers can pin down a price for their produce even if there is volatility in market prices
Consistent with economic logic, gun buyback programs have been very effective in reducing the number of guns in a city. True False
flase
Given freedom of movement for both goods and resources, if Florida producers specialize in oranges and Georgia producers specialize in peaches, it would be reasonable to conclude that
florida has a comparative advantage in producing organes
When oil prices increased to record levels in the 1970s, salaries dramatically increased for petroleum geologists skilled in finding oil. Those geologists who moved from other areas to the higher paying jobs were
following the guidance of the invisible hand and probable serving society best interests as well as their own
The tragedy of commons is more likely to apply to:
forests, fish, and elephants.
Jeff agrees to buy 40,000 pounds of frozen pork bellies for delivery one year from now; upon delivery he will pay $32,400. This transaction is called a:
futures contract
Monopolists are people, too. This means that:
gains to monopolists count just as much as losses to consumers
When a conflict arises in a major oil-exporting area of the world, such as the Middle East, the price of gasoline already in the storage tanks at local gas stations usually increases. Which of the following best explains this occurrence?
gas station owners anticipate higher replacement costs for their supply of gasoline and, therefore, raise their prices in response to this higher expected cost
"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This statement
gets the causation backwards
To maximize profit, a firm will hire workers when the ________ in revenue from hiring an additional worker ________ the worker's wage.
increase; is greater than
The supply curve for manufactured goods is usually more elastic than raw materials because production of manufactured goods can often be:
increased at the same cost per unit by building more factories
For a price increase from $100 to $110, supply is the most elastic when quantity supplied:
increases from 20 to 40
the demand curve for a good
indicates the quantities of the good that people will buy at various prices
economics is the study of how
individuals make choices because of scarcity and incentives
If Pizza Al's increases its prices by 10 percent, and as a result, its sales revenue increases by 3 percent, the price elasticity of demand for the services offered by the restaurant must be
inelastic
When the supply curve in the Sudanese slave trade is perfectly ________, every slave bought by the redeemers results in/is ________ held in captivity. A.elastic; redeemed at a higher price than expectedB.inelastic; more slavesC.inelastic; redeemed at a lower price than expectedD.inelastic; one less slave
inelastic, one less slave
Apple's iPod provides an example that market power may arise from:
innovation
Suppliers recognize there is a shortage in the market for their product when they notice that
inventories are falling
Which of the following is most likely to improve the productivity of workers? A.an increase in the minimum wageB.investment in human capital labor market issuesC.federal legislation mandating benefitsD.an increase in unionization
investment in human capital labor market issues
According to Adam Smith, individual self-interest
is a powerful force for economic progress when individuals are wisely directed by a strong central government
The statement, "Violent crime has decreased in the last five years,"
is positive because it is testable
consumer surplus
is the difference between the willingness to pay and the total amount paid
Why would firms use the practice of tying?
it is a subtle way to charge higher prices to those consumers with a high willingness to pay and a lower price to consumers with a low willingness to pay
There are two major theories of why education leads to higher earnings (though they are not mutually exclusive): signaling and the building of labor market issues. If the signaling theory is dominant, how would the average wage for college graduates change if everyone received a college degree?
it would decrease because it would be more difficult to differentiate workers
Under monopoly, the portion of the outgoing consumer surplus that is not transferred to the monopoly firm or still considered consumer surplus is:
known as deadweight loss
In the Wealth of Nations, Adam Smith wrote: Pecuniary wages and profit, indeed, are everywhere in Europe extremely different according to the different employments of labour and stock. But this difference arises partly from certain circumstances in the employments themselves, which, either really, or at least in the imaginations of men, make up for a small pecuniary gain in some, and counterbalance a great one in others; and partly from the policy of Europe, which nowhere leaves things at perfect liberty. (Book 1, Chapter 10) Which idea was Smith describing?
labor market issues
A price ceiling is a(n):
legally established maximum price that can be charged for a good
New housing takes some time to build, so rent control creates larger shortages in the:
long run than in the short run because long-run supply is more elastic
If an American teenager will work for $5 an hour and an employer is willing to pay that wage, but the minimum wage is $7.25 an hour and the employer is not willing to pay that much, the teenager goes unemployed and the market experiences:
lost gains from trade
Since the price of antibiotics does not include all the costs of using antibiotics, the price is too:
low, and so antibiotics are overused
If the price of a good does not take into account all of the relevant costs of its production, then the price of that good is too:
low, and the product will be overproduced
Which of the following would most likely increase the supply of beef?
lower prices of grains used to feed cattle
The chapter opens with a story about GlaxoSmithKline (GSK) and Combivir, the anti-AIDS drug. What was one of the reasons that GSK was selling Combivir for such low prices in Africa as compared to Europe?
lower prices were charged for humanitarian reasons
Doris, a burglar who breaks into houses, decides to break into the house at 265 Elm Street, rather than the house next door because the house next door has a sign in the yard that says "home protected by a security system." To an economist, Doris is
making a rational choice
The increase in a firm's revenues created by hiring an additional worker is called:
marginal product of labor
The market demand curve for labor is based on the:
marginal product of labor
Suppose that a firm plans to provide defense against asteroids striking the earth. Which of the following is TRUE?
most people will not pay a firm for asteroid defense
Which one of these goods is most likely to be an inferior good for most people with incomes over 100,000? Beer Natural Light Beer Gasoline. Sheetz Gasoline
natural light beer
Which of the following scenarios best describes a tragedy of the commons problem?
neighborhood residents discover strawberry plants in the flower beds at the city park
Which observation would be consistent with the impact of price ceilings?
newspapers switch to a smaller font size in order to decrease bulk
A flat firm-level demand curve means:
no market pricing power
A public good is:
nonrival and nonexcludable
If Francis experiences a decrease in his income, we would expect that, as a result, Francis's demand for
normal goods will decrease
One of the best known principles in economics is the idea of unintended consequences. It is very difficult to anticipate all the ways that citizens will respond to a policy. The task of the economist is to try to tease out before hand why a policy might not work in addition to explaining after the fact why it failed to achieve its goals. In 1989, Mexico City's government passed a law that banned drivers from driving one day a week, based on the last digit of the vehicle's license plate. For example, people whose license plates ended in 2 might not be able to drive that car on Tuesdays. After the policy was enacted, the evidence suggests that air quality did not improve. Economist Lucas Davis studied why air pollution didn't decline. Based on your knowledge of unintended consequences and human behavior and incentives, what do you think he found?
people still had to get to work so they took buses and taxis which tended to be worse polluters and people bought an older second car to drive on the off days
Fewer people get flu shots than is efficient because:
people usually perceive that the private cost of getting flu shots is higher than their private benefit
In a highly competitive industry, demand for a firm's product is:
perfectly elastic
The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary's statement is a (n) economic statement, and the labor head's statement is a (n) economic statement.
positive; normative
A museum in Russia has two entrances: one for locals (written in Russian) and one for tourists (written in English). People who enter through the entrance written in Russian will end up paying 81.93 Rubles ($3.00). English-speaking tourists will use the entrance written in English, but they will end up paying 409.67 Rubles ($15.00). This practice is an example of:
price discrimmination
Economists call selling the same product at different prices to different customers:
price discrimmination
Firms should exit the market if:
price falls below the average cost
When there is excess demand for a product in a market,
price must be below the equilibrium price
When economists say the quantity supplied of a product has decreased, they mean the
price of the product has fallen and consequently suppliers are producing less of it
When economists say the quantity demanded of a product has increased, they mean the
price of the product has fallen, and consequently, consumers are buying more of it.
When economists say the quantity demanded of a product has decreased, they mean the
price of the product has risen and consequently consumers are buying less of it
When economists say the quantity supplied of a product has increased, they mean the
price of the product has risen, and consequently, suppliers are producing more of it
which of the following is true in competitive markets?
price reflects the marginal value consumers place on the last unit purchased
If the supply of a good increased, what would be the effect on the equilibrium price and quantity?
price would decrease and quantity would increase
Markets work well because of the information delivered by:
prices
The market acts like a computer because:
prices are information processors
Which of the following is not a function of prices in a market system?
prices ensure an equitable distribution of goods and services among consumers
What condition is necessary in a constant cost industry?
prices of the industry inputs do not change as the industry expands
South Africa, with large natural diamond deposits, is famous for its diamond exports. The international demand for diamonds for industrial and other purposes, such as jewelry, has led to the production of synthetic diamonds by other countries, such as the United States. Which answer BEST describes the concept highlighted in this scenario? A.Prices provide incentives for sellers.B.Consumers prefer synthetic diamonds to natural ones.C.International cooperation has been reduced over the years.D.Markets are no longer linked together.
prices provide incentive for sellers
"Here in East Abalone, we are proud of our ability to be self-sufficient. We do not trade with other nations." From an economic perspective, citizens of this (mythical) nation can be expected to
produce less total value they could if they specialized and engaged in trade with other nations
Bill is willing to cut lawns for a minimum of $200 a week. He is, however, paid $250 for the same service by a lawn maintenance company. This is an example of
producer surplus
According to the law of supply,
producers are willing to supply larger amounts of a good as its price increases.
an increase in the supply of the product implies that
producers will now charge a lower price for a given quantity of output
How can sellers increase profits when they face a price ceiling?
reduce the quality of the product and provide less customer service
Asphalt is the refined residue from crude oil. When gasoline prices are high, oil refiners pull every last drop of gasoline out of a barrel of crude. This would imply that higher gasoline prices mean a(n):
reduced supply pf asplay causing higher asphalt prices
A crime scene cleaner earns about three to four times more than an office cleaner, even though neither job requires a college degree. This difference in wages:
reflects a compensating differential
If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as
relatively elastic
If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be
relatively inelastic
If a pharmaceutical company discovering a new drug is not granted a patent to retain its monopoly power on the drug,:
research and development in discovering new drugs will decrease
which of the following will most likely occur under a system of clearly defined and enforced private property rights?
resource owners will gain by discovering and employing their resources in ways that are highly valued by others
Which of the following is an example of tying?
restrictions that prohibit patrons from bringing their own wine to restaurants
Price ceilings reduce quality because:
sellers facing excess demand cannot raise prices to increase profit
For which one of the following goods would you expect the demand to be most elastic?
sheetz and BP gas
When a tax is imposed on consumers the demand curve will:
shift downward by the amount of the tax
Other things constant, an increase in consumer income will
shift the demand curve for automobiles to the right
If the price of coffee decreases, the demand curve for tea (a substitute good) will
shift to the left
A price ceiling creates a ________ when it is set ________.
shortage, below the equilibrium price
free market prices will eliminate
shortages and surpluses
Price ceilings create five important effects:
shortages, reductions in product quality, wasteful lineups, a loss from gains to trade, and a misallocation of resources.
Bundling can increase efficiency when fixed costs are high because the fixed costs are:
spread across more customers
When experts first predicted major weather-related coffee crop failures in Central and South America in 1986, the price of coffee already on grocery shelves in the United States increased sharply. When coffee became temporarily more scarce, the usefulness to society of "coffee conservation" increased. The immediate sharp price increase (which soon leveled off) gave consumers an incentive to
start conserving coffee immediately and switch to other beverages if it was easy to do so
The student government associations at several universities have experimented with purchasing bicycles to leave around campus for everyone's use. Anyone who needs the bike can use it, and they are not allowed to lock the bike up or take it home, but rather must leave it on campus for someone else to use. Economic theory would predict that
students will not take as good care of these commonly owned bikes as they do their own bikes
Not only do both wage subsidies and minimum wages increase wages, but:
subsidies increase employment whereas minimum wages reduce it
A ________ creates a situation in which the price received by sellers ________ the price paid by buyers.
subsidy, exceeds
which of the following is false?
the economic way of thinking stresses that good intentions lead to sound economic policy
Which one of the following items best reflects the concept of opportunity cost?
the fact that many of the best college basketball players drop out of college to pursue a professional career.
The text states: "The great economic problem is to arrange our limited resources to satisfy as many of our wants as possible." How does a market achieve this goal?
the forces of demand and supply use prices as a signaling device that directs resources to their highest-value uses
t's worthwhile to grow roses in Kenya because: A.it's impossible to grow roses anywhere else.B.very few people have to be involved in the process of supplying roses grown there.C.people in Amsterdam don't cooperate with people in Kenya.D.the gains from growing roses in an ideal climate are greater than the costs of transporting roses around the world.
the gains from growing roses in an ideal climate are greater than the costs of transporting roses around the world
Demand will be more elastic when
the larger the number of good substitues
The economic principle that states that individuals or nations can gain by specializing in the production of goods that they produce cheaply and exchanging for other desired goods that they could only produce at a higher cost is
the law of comparative advantage
In a monopoly market
the lure of above-normal profits may give a firm an incentive to develop new products and technologies.
Which of the following statements is NOT true regarding subsidies?
the main beneficiary of a subsidy is the party that directly receives the check from the government
People are willing to pay more for a diamond than for a bottle of water because
the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water
A rational decision maker takes an action if and only if
the marginal benefit of the action exceeds the marginal cost of the action
A firm will continue to hire workers as long as:
the marginal product of labor Is greater than the wage
Beginning in the early 1990s, private landowners in Zimbabwe have started fencing in large areas of land that contain black rhinos, which were on the verge of extinction. These private owners charge fees for a stay at the lodges on the property (eco-tourism) and also sell hunting safaris and photo safaris. As a result,
the population of black rhinos has increased
Saccharin and aspartame are both low-calorie substitutes for sugar. If saccharin is found cause cancer,
the price of aspartame will increase
Dairy farmers use sawdust for milk cow bedding. What happened to the price of milk because of the housing slowdown in 2007?
the price of milk rose as the supply of milk decreased
the law of desmans indicates that
the quantity of a good that people will buy is inversely related to the price of the good
a decrease in supply means that
the quantity supplied at every price will decrease
Marián Hossa was paid $7.4 million by the Detroit Red Wings for the 2008-2009 season. We can conclude that:
the red wings expected Marian Hossa to increase the teams revenue by at least $7.4 million
The question of who pays the greater amount of a commodity tax is determined by:
the relative elasticities of demand and supply
Which of the following statements is TRUE? A.All else equal, there is no trade-off between risk of job injury and wages.B.Because employers care so much about maximizing profits, they are likely to discriminate against minority workers.C.The falling returns to human capital labor market issues investment for women are because of employer discrimination.D.The rising returns to human capital labor market issues may be attributable to the growing importance of advanced technology.
the rising returns to human capital labor market issues may be attributable to the growing importance of advanced technology
Which is the MOST correct statement about the impact of rent controls?
the short-run supply curve for apartments is inelastic, so rent controls create smaller shortages in the short run than in the long run
demand will be more inelastic,
the shorter the time the consumer has to adjust to price changes
Which of the following statements is FALSE? A.Products that take a long time to produce, such as decades-aged Scotch whiskey, have supply curves that are less responsive to price changes.B.A perfectly inelastic supply curve is vertical.C.The supply curve of oil is more inelastic in Texas than it is globally.D.The supply curve is more elastic in the long run than in the short run.
the supply curve for oil Is more inelastic in Texas than it is globally
U.S. Highway 12 is part of a crucial two-lane artery from the seaports in Washington State to the tar sands in Canada. Extracting oil from the tar sands requires very large equipment and transporting it takes up both lanes of U.S. Highway12. In August of 2010, Idaho granted ConocoPhilips a road permit that allowed it to transport four oil-processing units. Without this permit, ConocoPhilips would have had to transport those units a much longer distance to get them to their destination. If permits for this highway were not allowed, how would that affect the elasticity of which curve in the market for oil?
the supply curve would become less elastic
Suppose a major civil war broke out in an important oil-producing nation. What impact would this have on the market for oil?
the supply of oil would fall
Gun buyback programs, such as the one instituted in Washington, D.C., tend to not be very effective because: A.the supply of the types of guns exchanged is highly elastic.B.the programs tend to have a large impact on the price of guns on the street.C.the programs simply end up decreasing the elasticity of supply.D.the supply of the types of guns exchanged is not very elastic.
the supply of the types of guns exchanged is highly elastic
What impact would a severe drought that destroys the wheat crop in several areas of the United States have on the market for wheat?
the supply of wheat would fall
Which of the following would decrease the supply of sugar?
the tariff on imported sugar increases
Which of the following is true?
the value of a good generally depends on who uses it and circumstances such as when and where it is used
The fact that some people love tomatoes while others dislike them illustrates that
the value of a good is subjective
The opportunity cost of going to college is
the value of the best opportunity a student gives up to attend college
The opportunity cost of an action is
the value of the best opportunity that must be sacrificed in order to take the action.
When a consumer compares the price of a good to the value of that good, he or she is really comparing:
the value of the good to its opportunity cost
Suppose that the government decided to reduce pharmaceutical patent protection by requiring companies to sell their drugs at marginal cost. What are the likely consequences of such a policy?
there would be an increase in consumer surplus, the deadweight loss in the market would decline, and the future supply of new drugs would decrease
When the WVU Mountaineers football team is up big after halftime, they often play their second and third team players. One of your friends notices that when the third team plays that WVU wins by a bigger margin than when just the first team plays. He recommends that the third team see more playing time as a result. Having taken an economics class, what do you say to him?
they only play when the first team is doing bad
How will consumers generally react to an increase in the price of butter?
they will substitute other goods like margarine for the more expensive butter
Why is the supply curve for oil rather inelastic?
to increase the production of oil would require a very significant outlay in terms of costs of exploration and drilling
Government gun buyback programs designed to take guns off the street cause the demand for low-quality guns to increase. True False
true
Some workers might prefer less safety and more pay than more safety and less pay.
true
Subsidies must ultimately be paid for through taxes. true or false
true
The competitive firm's demand curve is horizontal at the market price.
true
The long run is the period after all exit and entry has occurred.
true
The more and better substitutes a good has, the more elastic the demand for that good will be. True False
true
The productivity of the firm is directly related to the productivity of an individual worker.
true
The short run is the period before exit or entry can occur.
true
Assembly Bil 5 in California goes into effect on January 1st. This bill forbids businesses from using independent contractors unless they can meet three stringent requirements. Targeted at Uber and Lyft, the legislation. In response, a number of online media companies, such as Vox, have announced that it will be laying off hundreds of freelancers in California. This is an example of what economic principle at work.
unintended consequences
Which of the following statements about the price elasticity of supply in the Sudanese slave trade is correct? A.When the supply curve is more elastic, every slave bought by the redeemers is one fewer slave held in captivity.B.When the supply curve is perfectly inelastic, every slave bought by the redeemers is one fewer slave held in captivity.C.When the supply curve is less elastic, every slave bought by the redeemers is one additional enslaved person.D.When the supply curve is more inelastic, every slave bought by the redeemers is one additional enslaved person.
when the supply curve is perfectly inelastic, every slave bought by the redeemers is one fewer slave held in captivity
Which of the following statements is correct for a specific good or service?
whoever bears the burden of a tax also received the benefit of the subsidy
The general rule of hiring workers is to hire:
workers if they contribute more to the firms revenues than the firms costs
If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
x and y are complements
n 1808, when slavery in the United States was still legal, Congress banned the importation of new slaves. Under these circumstances, would a slave redemption campaign have worked well? Why? A.No, because the supply of slaves was elastic.B.Yes, because the supply of slaves was inelastic.C.No, because the supply of slaves was inelastic.D.Yes, because the supply of slaves was elastic.
yes because the supply of slaves was inelastic
Under a system of private property, could a 60-year-old owner of a tree farm benefit by planting and caring for a crop of Douglas firs, most of which will not be ready to cut for 50 years?
yes the farmer will benefit because this action will increase the value of land if and when the farmer decides to sell
