Economics Exam 1

Which of the following items is an inferior good? a. Discount stores b. Luxury SUVs c. Car rentals d. Airline tickets

Discount stores

What is quantity supplied? a. It is the amount of an item that a seller is willing to sell at a particular price. b. It is the amount of an item that a buyer is willing to buy at a particular price. c. It is a graph that plots the quantities of an item that a seller plans to sell at different prices. d. It is a graph that plots how much a seller produces at different points in time.

It is the amount of an item that a seller is willing to sell at a particular price.

What happens to the equilibrium price and quantity when demand increases and simultaneously supply decreases, and the relative size of the shifts is not known? a. The equilibrium price rises, and the change in the equilibrium quantity is ambiguous. b. The equilibrium price falls, and the change in the equilibrium quantity is ambiguous. c. The equilibrium quantity falls, and the change in the equilibrium price is ambiguous. d. The equilibrium quantity rises, and the change in the equilibrium price is ambiguous.

The equilibrium price rises, and the change in the equilibrium quantity is ambiguous.

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it? a. The cost-benefit principle. b. The interdependence principle. c. The marginal principle. d. The opportunity cost principle.

The opportunity cost principle.

When quantity demanded exceeds quantity supplied, _____ exists.' a. equilibrium b. fixed demand c. a shortage d. a surplus

a shortage

You go to Starbucks and see that the price of your favorite tall vanilla latte has gone up by 25 cents. All sizes of the vanilla lattes are now more expensive. As a result of this price increase, you would expect to see a a. fall in the quantity demanded of vanilla lattes. b. rise in the quantity demanded of vanilla lattes. c. fall in the demand for vanilla lattes. d. rise in the demand for vanilla lattes.

a. fall in the quantity demanded of vanilla lattes.

Sunk costs are costs that a. should be considered in any decision. b. are potential costs associated with a particular decision. c. are incurred in the past and cannot be reversed. d. are part of the opportunity costs of a decision.

are incurred in the past and cannot be reversed.

The cost-benefit principle states that a decision should be pursued only if the a. costs are greater than the benefits. b. costs are negative. c. benefits are greater than the costs. d. benefits are positive.

c. benefits are greater than the costs.

An equilibrium price is a price where the a. amount that buyers are willing to buy is equal to the amount that buyers are able to buy. b. demand curve is identical to the supply curve. c. quantity demanded no longer changes. d. quantity supplied equals the quantity demanded.

d. quantity supplied equals the quantity demanded.

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle. a. interdependence b. cost-benefit c. opportunity cost d. marginal

interdependence

Diminishing marginal benefit: a. is when buying an additional item yields a smaller marginal benefit than the previous item. b. is not important in determining a consumer's purchase decision. c. is when buying an additional item yields a larger marginal benefit than the previous item. d. is when consumers do not follow the rational rule.

is when buying an additional item yields a smaller marginal benefit than the previous item.

Shifts in demand a. always lead to increases in equilibrium quantity. b. lead to price and quantity to move in the same direction. c. always lead to increases in equilibrium price. d. lead to price and quantity to move in opposite directions.

lead to price and quantity to move in the same direction.

The __________ suggests, decisions about quantities are best made incrementally. a. cost-benefit principle b. interdependence principle c. marginal principle d. opportunity cost principle

marginal principle

A market is a a. a place where governments decide what is sold. b. setting that brings together potential buyers and sellers. c. set of demand curves for a product. d. set of supply curves for a product.

setting that brings together potential buyers and sellers.

Due to a decline in demand and popularity, Ford Motor Company is planning to phase out traditional sedans such as 'Fusion' and 'Taurus' to focus on SUVs and trucks. Ford's sedans and trucks/SUVs are a. substitutes-in-production. b. complements-in-production. c. products that do not follow the law of supply. d. inputs in production.

substitutes-in-production.

The law of demand refers to a. the positive relationship between price and quantity supplied. b. the inverse relationship between price and quantity demanded. c. the positive relationship between price and quantity demanded. d. the inverse relationship between price and quantity supplied.

the inverse relationship between price and quantity demanded.

The law of supply refers to a. the inverse relationship between price and quantity supplied. b. the positive relationship between price and quantity demanded. c. the inverse relationship between price and quantity demanded. d. the positive relationship between price and quantity supplied.

the positive relationship between price and quantity supplied.

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are a. inferior goods. b. goods with a congestion-effect. c. goods with a network-effect. d. normal goods.

normal goods.

If the price of jet fuel rises, the a. supply of airline flights increases. b. quantity supplied of jet fuel increases. c. supply of jet fuel decreases. d. supply of jet fuel increases.

quantity supplied of jet fuel increases.