ECON Exam 1
*See MyEconLab* The diagram to the right illustrates a demand curve. As with all demand curves, this curve's slope is:
*See MyEconLab*
*See MyEconLab* The diagram to the right represents a demand curve for apples. The original demand curve is D1. If a factor other than price which affects demand changes, causing demand to decrease, the resultant demand curve is represented by:
*See MyEconLab*
*See MyEconLab* Indicate which of the following could cause a movement from point A to C. (Check all that apply.) Part 5 A. A fall in the number of buyers. Your answer is correct. B. A fall in the price of hot sauce. C. The expectation of a higher future price for traditional wings. D. A rise in vegetarianism.
*See MyEconLab* A. A fall in the number of buyers. D. A rise in vegetarianism.
*See MyEconLab* Imagine that the curves shown in the accompanying figure represent two demand curves for traditional wings (basket of six) at Buffalo Wild Wings. Further assume that wings are a normal good. Part 2 The movement from point A to B on D1 is caused by Part 3 A. an increase in the price of baskets of traditional wings. Your answer is correct. B. a decrease in the price of baskets of traditional wings. C. a decrease in buyer incomes.
*See MyEconLab* A. an increase in the price of baskets of traditional wings.
*See MyEconLab* Imagine that the table shows the quantity demanded of UGG boots at five different prices in 2021 and in 2022. Which of the following variables could cause the demand for UGG boots to change as indicated from 2021 to 2022? (Check all that apply.) A. An increase in the price of UGG boots. B. A decrease in the number of buyers. Your answer is correct. C. A decrease in the price of a substitute good. Your answer is correct. D. The expectation that UGG boots will rise in price.
*See MyEconLab* B. A decrease in the number of buyers. C. A decrease in the price of a substitute good.
*See MyEconLab* The diagram to the right illustrates a very important relationship in economics between two variables: the price of a good and the quantity demanded of that good. The two variables in this diagram are: A. price (dollars per bushel) on the horizontal axis and quantity (bushels per week) on the vertical axis. B. price (dollars per bushel) on the vertical axis and quantity (bushels per week) on the horizontal axis. C. price (bushels per week) on the vertical axis and quantity (dollars per bushel) on the horizontal axis. D. none of the above.
*See MyEconLab* B. price (dollars per bushel) on the vertical axis and quantity (bushels per week) on the horizontal axis.
*See MyEconLab* On the diagram to the right, a movement from A to C represents a A. change in quantity demanded. B. decrease in demand. C. change in demand. D. movement up the demand curve.
*See MyEconLab* C. change in demand.
*See MyEconLab* Which of the following would cause a shift in the demand curve from point A to point B? A. A decrease in income (inferior good). B. An increase in income (normal good). C. An increase in the price of a substitute good. D. All of the above.
*See MyEconLab* D. All of the above.
*See MyEconLab* Below are both a demand schedule and a demand curve. Which one is best suited to find the quantity demanded at a price of $4.00?
*See MyEconLab* The demand schedule
*See MyEconLab* In the diagram to the right, the curve labeled "S" is apparently _____, while the curve labeled "D" is apparently _____. A. nonlinear; linear B. dynamic; static C. linear; nonlinear D. static; dynamic
*See MyEconLab* A. nonlinear; linear
*See MyEconLab* The diagram in panel b is an example of A. the substitution effect. B. the income effect. C. a demand curve. D. a demand schedule.
*See MyEconLab* C. a demand curve.
From the list below, select the variable that will cause the demand curve to shift: A. Consumer income B. The cost of raw materials C. The number of firms in the market D. Technology and productivity
A. Consumer income
Which of the following covers the study of topics such as inflation or unemployment? A. Macroeconomics B. Microeconomics C. Both microeconomics and macroeconomics give equal emphasis to these problems. D. None of the above.
A. Macroeconomics
State whether each of the following events will result in a movement along the demand curve for McDonald's Big Mac hamburgers or whether it will cause the curve to shift. (continues for next few cards) The price of Burger King's Whopper hamburger increases. This will cause A. demand for McDonald's Big Mac hamburgers to increase. B. demand for McDonald's Big Mac hamburgers to decrease. C. a movement along the demand curve for McDonald's Big Mac hamburgers.
A. demand for McDonald's Big Mac hamburgers to increase.
The U.S. economy enters a period of decline in incomes. This will cause A. demand for McDonald's Big Mac hamburgers to shift to the right if they are inferior goods. B. demand for McDonald's Big Mac hamburgers to shift to the left if they are inferior goods. C. a movement along the demand curve for McDonald's Big Mac hamburgers if they are normal goods.
A. demand for McDonald's Big Mac hamburgers to shift to the right if they are inferior goods.
One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls A. scarcity. B. the market. C. rationality. D. economics.
A. scarcity.
KFC raises the price of a bucket of fried chicken. This will A. shift the demand for McDonald's Big Mac hamburgers to the right. B. shift the demand for McDonald's Big Mac hamburgers to the left. C. cause a movement along the demand curve for McDonald's Big Mac hamburgers.
A. shift the demand for McDonald's Big Mac hamburgers to the right.
The distinction between substitutes and complements is A. substitute goods are used for the same purposes while complementary goods are used together. B. when income increases, demand for a complementary good decreases while demand for a substitute good increases. C. substitute goods are used together while complementary goods are used for the same purposes. D. when income increases, demand for a substitute good increases while demand for a complementary good falls.
A. substitute goods are used for the same purposes while complementary goods are used together.
A perfectly competitive market is a market that meets the conditions of A. (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market. B. (1) few buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market. C. (1) many buyers and sellers, (2) all firms selling differentiated products, and (3) no barriers to new firms entering the market. D. (1) many buyers and sellers, (2) all firms selling identical products, and (3) significant barriers to new firms entering the market.
A. (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.
A column by Greg David in Crain's New York Business discussed the effect of rising costs on prices charged by New York City restaurants. David argued that higher costs would result in higher prices and, "at some point, higher prices should reduce demand." Source: Greg David, "New York Area Restaurants Are Hiking Prices," crainsnewyork.com, May 2, 2018. Is he correct that if the price of a product increases, the demand for the product is reduced? A. No: an increase in the price of a product will cause a decrease in the quantity demanded of that product, not a decrease in demand. B. Yes, he is correct that if the price of a product increases, the demand for the product is reduced. C. No: an increase in the price of a product will cause the demand curve to shift to the left, thereby decreasing quantity demanded. D. No: an increase in the price of a product will cause an increase in demand for the product.
A. No: an increase in the price of a product will cause a decrease in the quantity demanded of that product, not a decrease in demand.
What do economists mean when they use the Latin expression ceteris paribus? A. Prior to an event B. All else equal. C. The thing speaks for itself. D. The whole is just the sum of the parts.
B. All else equal.
Microeconomics is the study of A. the economy as a whole, including topics such as inflation, unemployment, and economic growth. B. how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices. C. firms as individual units excluding how these firms interact with one another. D. "small" (less than $100,000) economic transactions in the economy.
B. how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.
Macroeconomics is A. the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices. B. the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth. C. the study of firms as a group with special emphasis on how these firms interact with one another. D. the study of "large" (greater than $100,000) economic transactions in the economy.
B. the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.
An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More specifically, A. the substitution effect is the decrease in quantity demanded because the consumers' purchasing power is reduced and the income effect is the decrease in quantity demanded owing to the fact that the product is more expensive relative to other goods. B. the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in consumers' purchasing power. C. the substitution effect is the decrease in quantity demanded because consumer tastes have changed and the income effect is the decrease in quantity demanded because consumer incomes have fallen. D. the substitution effect is the decrease in quantity demanded because there are fewer consumers and the income effect is the decrease in quantity demanded because consumer incomes failed to increase.
B. the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in consumers' purchasing power.
The distinction between a normal and an inferior good is A. normal goods are used for the same purposes while inferior goods are used together. B. when income increases, demand for a normal good increases while demand for an inferior good falls. C. normal goods are used together while inferior goods are used for the same purposes. D. when income increases, demand for a normal good decreases while demand for an inferior good increases.
B. when income increases, demand for a normal good increases while demand for an inferior good falls.
Consider the following two uses of the word "demand" in news articles: i. An article in the Wall Street Journal noted that an "increase in the price of oil quickly reduces demand for oil." ii. A different article in the Wall Street Journal noted: "Electric cars are poised to reduce U.S. gasoline demand by 5% over the next two decades...." Sources: Josh Zumbrun, "Oil's Plunge Could Help Send Its Price Back Up," Wall Street Journal, February 22, 2015; and Lynn Cook and Alison Sider, "U.S. Gasoline Demand Is Likely to Slide," Wall Street Journal, June 20, 2016. Do you agree with how the first Wall Street Journal article uses the word "demand"? A. Yes, the article is correct in its use of the word "demand." B. No, a change in the price of oil affects the quantity of oil demanded, not the demand for oil. C. No, the article incorrectly assumes that price can influence the amount of oil that consumers purchase. D. No, this should be the market demand for oil, not the demand for oil.
B. No, a change in the price of oil affects the quantity of oil demanded, not the demand for oil.
Trade-offs force society to make choices, particularly when answering the following three fundamental questions: A. One, what goods and services will be produced domestically? Two, how will the goods and services be produced? Three, is the distribution of goods and services fair? B. One, what goods and services will be produced? Two, how will the goods and services be produced? Three, who will receive the goods and services produced? C. One, what goods and services will be produced in foreign countries? Two, who will produce the goods and services? Three, who will receive the goods and services produced? D. One, what goods and services will be produced? Two, how will the goods and services be produced? Three, is the distribution of goods and services fair?
B. One, what goods and services will be produced? Two, how will the goods and services be produced? Three, who will receive the goods and services produced?
Does it indicate that gasoline-powered cars and hybrids are substitutes or complements? A. Substitutes, because the more consumers buy of one good, the more they will buy of the other good. B. Substitutes, because the more consumers buy of one good, the less they will buy of the other good. C. Complements, because they are used together. D. Complements, because they are used for the same purpose.
B. Substitutes, because the more consumers buy of one good, the less they will buy of the other good.
A market is a group of ____________ and ____________ of a good or service and the institution or arrangement by which they come together to trade.
Buyers and Sellers
Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational? A. Microsoft's choice was rational: the price will maximize profit. B. We cannot assume that this pricing decision was rational because we do not have enough information to make an assumption. C. When we assume the managers at Microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationality. D. Microsoft's choice cannot be rational: the price is clearly more than most people are willing and able to pay.
C. When we assume the managers at Microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationality.
McDonald's eliminates $1.00 off coupons. This will cause A. demand for McDonald's Big Mac hamburgers to shift to the left. B. demand for McDonald's Big Mac hamburgers to shift to the right. C. a movement along the demand curve for McDonald's Big Mac hamburgers.
C. a movement along the demand curve for McDonald's Big Mac hamburgers.
Any model is based on making assumptions because A. we cannot analyze an economic issue unless we reduce its complexity. B. models have to be simplified to be useful. C. both a and b. D. neither a nor b.
C. both a and b.
Firms choose how to produce the goods and services they sell. In many cases, firms face a trade-off between using more workers or using more machines. For example, A. a local service station has to choose whether to provide car repair services using more diagnostic computers to support their auto mechanics and fewer tools to support their auto mechanics or more tools to support their auto mechanics and fewer diagnostic computers to support their auto mechanics. B. many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer machines and more workers and a production method in China that uses more machines and fewer workers. C. many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines. D. movie studios have to choose whether to produce animated films using more highly skilled animators to draw them by hand or fewer highly skilled animators and more low-skill animators.
C. many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines.
Equity is A. an exactly equal distribution of income. B. when poorer people's income is growing more rapidly than more wealthy people's income. C. the fair distribution of economic benefits. D. always achieved by the market.
C. the fair distribution of economic benefits.
Opportunity cost is A. the idea that because of scarcity, producing more of one good or service means producing less of another good or service. B. when consumers and firms use all available information as they act to achieve their goals. C. the highest valued alternative that must be given up to engage in an activity. D. when unlimited wants exceed the limited resources available to fulfill those wants.
C. the highest valued alternative that must be given up to engage in an activity.
The law of demand is the assertion that A. the quantity demanded of a product is directly related to its price. B. changes in price and changes in quantity demanded move in the same direction. C. the quantity demanded of a product is inversely related to its price. D. the demand for a product is negatively related to its price.
C. the quantity demanded of a product is inversely related to its price.
When the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives, A. pollution is likely to increase. B. the policies are futile because where the environment is concerned, it has been repeatedly shown that firms do not respond to economic incentives. C. the policies are consistent with economic incentives. D. the policies are likely to be more successful than policies that cost firms more, but they do not recognize economic incentives.
C. the policies are consistent with economic incentives.
Societies organize their economies in two main ways to answer the three questions of what, how, and who. A society can have a ________________ _________________ economy in which the government decides how economic resources will be allocated. Or a society can have a ___________________ economy in which the decisions of households and firms interacting in markets allocate economic resources.
Centrally planned, Market
____________, __________, and _________________ decide(s) what goods and services will be produced.
Consumers, firms, and government
A hypothesis in an economic model is A. usually about a causal relationship. B. a statement that may be either correct or incorrect about an economic variable. C. tested before it can be accepted (or not rejected). D. all of the above.
D. all of the above.
Economics is a social science because A. it applies the scientific method to the study of the interactions among individuals. B. it considers human behavior—particularly decision-making behavior. C. it is based on studying the actions of individuals. D. all of the above.
D. all of the above.
In particular, the demand curve will shift to the A. right, if casual dining is unrelated to income. B. right, if casual dining is a normal good. C. left, if casual dining is an inferior good. D. left, if casual dining is a normal good.
D. left, if casual dining is a normal good.
Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when A. marginal benefit is maximized. B. marginal cost is zero. C. marginal benefit is greater than marginal cost. D. marginal benefit equals marginal cost.
D. marginal benefit equals marginal cost.
The Toyota Prius is a gasoline-electric hybrid car that gets 54 miles to the gallon. An article in the Wall Street Journal notes that sales of the Prius have been hurt by low gasoline prices and that: "Americans are now more likely to trade in a hybrid or an electric vehicle for an SUV...." Does the article indicate that gasoline-powered cars and gasoline are substitutes or complements? Briefly explain. A. Substitutes, because the more consumers buy of one good, the more they will buy of the other good. B. Complements, because they are used for the same purpose. C. Substitutes, because the more consumers buy of one good, the less they will buy of the other good. D. Complements, because they are used together.
D. Complements, because they are used together.
Do you agree with how the second Wall Street Journal article uses the word "demand"? A. No, this would reduce the quantity of gasoline demanded, not the demand for gasoline. B. No, the article incorrectly assumes that electric cars and gasoline use are related. C. No, this should be the market demand for gasoline, not the demand for gasoline. D. Yes, the article is correct in its use of the word "demand."
D. Yes, the article is correct in its use of the word "demand."
___________is the study of the choices people make to attain their goals, given their scarce resources.
Economics
A ____________ economy is an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.
Mixed
__________________ __________________ is concerned with what is, and __________________ __________________ is concerned with what ought to be. Economics is about __________________ __________________, which measures the costs and benefits of different courses of action.
Positive analysis, normative analysis, positive analysis
______________ _______________occurs when a good or service is produced at the lowest possible cost. _______________ ________________ occurs when production is in accordance with consumer preferences.
Productive Efficiency, Allocative Efficiency
Jiffy peanut butter and Smucker's Strawberry jam are considered to be complementary goods. Show how an increase in the price of Jiffy peanut butter affects the demand for Smucker's Strawberry jam. When the price of a related good changes, this will result in ____ _________ ___ _____ __________ _________. In particular, when the price of Jiffy peanut butter increases, the demand curve for Smucker's Strawberry jam will shift to the __________.
a shift in the demand curve, left
Steamed rice is considered to be an inferior good. Show how an increase in consumer income affects the demand for steamed rice. A change in consumer income will result in __ __________ ___ _____ ________ __________ In particular, if consumer income increases, then the demand for steamed rice will shift to the _____________.
a shift in the demand curve, left
In the United States, who receives the goods and services produced depends largely on
how income is distributed
The effect of an increase in demand is a ________ ______ the demand curve
shift of
You observe that when the price of UGG boots increases the demand for Sketchers lace−up sneakers increases. UGG boots and Sketchers lace−up sneakers are considered to be _______________ goods.
substitute
