Econ Test 1 T/F
By an increase in demand we mean a leftward shift of the demand curve
False
When a firm decides to produce no output in the short run its costs will be zero
False
Diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise
True
Given a downsloping demand curve and upsloping supply curve for a product, an increase in the price of a substitute good will increase equilibrium price and quantity
True
If the marginal cost curve lies below the average variable cost curve, the average variable cost curve must be falling
True
In the long run there are no fixed costs
True
Products and services are scarce because resources are scarce
True
a local bakery hiring two additional workers is an example of a short run adjustment
True
an increase in demand accompanied by an increase in supply will increase the equilibrium quantity but the effect on equilibrium price will be indeterminate
True
in economics, a firm earns a normal profit when its total revenue equals its total economic costs
True
Marginal product is the total product divided by the number of workers employed
false
economic profit is found by subtracting accounting costs from total revenue
false
supply refers to the amount of a product that a producer will offer in the market at some particular price
false
the short run is a period of time during which all costs are fixed costs
false
If demand increases and supply simultaneously decreases, equilibrium price will rise
true
Variable costs are costs that vary directly with output
true
used clothing is a good example of an inferior good
true
Although sleeping in on a work or school day has an opportunity cost, sleeping late on the weekend does not
False
An economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy
False
An economy cannot produce at a point outside of its production possibilities curve because human economic wants are insatiable
False
Because economic generalizations are simplifications from reality, they are impractical and useless
False
Certain inherently desirable products such as education and health care should be produced so long as resources are available
False
If economic theories are solidly based on relevant facts, then appropriate economic policy becomes obvious and uncontroversial
False
Normative statements are expressions of facts
False
Positive statements are expressions of value judgements
False
a decrease in supply of X increases the equilibrium price of X, which reduces the demand for X and automatically returns the price of X to its initial level
False
a firm's economic profit is usually higher than its accounting profit
False
a linear demand curve has a constant elasticity over the full range of the curve
False
a price floor in a competitive market will result in persistent shortages of a product
False
an increase in quantity supplied might be caused by an increase in production costs
False
income and substitution effects account for an upward sloping supply curve
False
price elasticity of demand measures the slope of the demand curve
False
the law of diminishing returns explains diseconomies of scale
False
the law of diminishing returns explains why the long-run average total cost curve is U-shaped
False
the rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market
False
the smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it
False
A government subsidy per unit of output increases supply
True
BMW constructing a new assembly plant in South Carolina is an example of a long-run adjustment
True
Choices entail marginal costs because resources are scarce
True
Consumers buy more of normal goods as their incomes rise
True
Rational individuals may make different choices because their preferences and circumstances differ
True
The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment
True
average fixed costs diminish continuously as output increases
True
if the marginal utility of the last unit of A consumed is 12 and the marginal utility of the last unit of B is consumed is 8 then a price of A of $6 and a price of B of $4 would be consistent with consumer equilibrium
True
marginal analysis means that decision-makers compare the extra benefits with the extra costs of a specific choice
True
Surpluses drive market prices up, shortages drive them down
false
Toothpaste and toothbrushes are substitute goods
false
a ceiling price price in a competitive market will result in persistent surpluses of a product
false
if market demand increases and market supply decreases, the change in equilibrium price is unpredictable without first knowing the exact magnitudes of the demand and supply changes
false
A government tax per unit of output reduces supply
true
at zero units of output, a firm's variable costs are zero
true
generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities
true
if price and total revenue are directly related, demand is inelastic
true
if price changes and total revenue changes in the opposite direction, demand is relatively elastic
true
if the demand for wheat is highly price inelastic, an extraordinarily large crop may reduce farm incomes
true
the law of diminishing returns explains why the short run marginal cost curves are upward sloping
true
the real opportunity cost of producing product X is the amounts of products Y, Z, and so forth that might have been produced if resources had not been used to produce X
true
