Economics final
Which of the following will most likely happen if the price of a movie theater ticket increases?
The demand for Netflix increases
How does an increase in societal income levels affect the demand curve?
The entire curve shifts to the right
The main difference between a mixed economy and a free market is:
The greater amount of government involvement in a mixed economy.
As per Adam Smith, why would it typically be unnecessary for government to intervene in business transactions between producers and consumers?
The impact of the "invisible hand"
What effect does rising input costs have on the price of a product?
The product becomes more expensive to produce
In Bastiat's "Broken Window" parable, who is the person "who is always kept in the shade," i.e., the person whose plight is usually forgotten?
The shoemaker
Why are public goods examples of so-called "market failure"?
They show that free markets cannot/will not always distribute certain resources to consumers
When a business owner considers the costs and benefits associated with hiring additional employees, he/she is:
Thinking at the margin
Which of the following might a government provide as part of a "safety net" for its citizens?
Unemployment compensation
____ is the power that a product or service has to satisfy a want.
Utility
Which of the following is a summary of the "three key economic questions"?
What goods and services should be produced, how, and for whom?
A production possibilities curve shows the relationship between the production of:
any two categories of goods
In a system of voluntary exchange, who makes the final decisions?
buyers and sellers
In a free enterprise system, what is the most common way that consumers make their desires known to businesses?
buying or not buying products
The substitution effect and the income effect describe:
factors that influence consumer buying choices
Which of the following are "factors of production"?
land, labor, and capital
Which group lists the key principles of the free enterprise system?
profit motive, legal equality, private property, voluntary exchange
All goods and services are scarce because
resources are limited
What causes a shift in the demand curve?
A change in a factor other than price
If butcher shop owner Mr. Manisero notices that demand for all types of meat has been dropping steadily over the last year, while prices have actually decreased over that time period, what condition might he be seeing?
A change in the quantity demanded due to a popular low-protein diet
Which of the following is the best example of a public good?
A highway system
Which of the following is an example of the concept of "human capital"?
A knowledge a coach has of opposing teams
Restaurant owner Alexandra has not changed menu prices in a year. One month ago, she noticed that sales for all lunch items had fallen by 40%. Which of the following most likely caused the demand curve to shift?
A local newspaper published a poor review of the restaurant
Which of the following people is an entrepreneur?
A person who opens a new cafe
What is the difference between a shortage and scarcity?
A shortage can be temporary or long-term, but scarcity always exists
Which of the following is considered a negative effect of government regulations?
All of these are negatives associated with government regulations
Economists say that a demand curve is accurate only as long as the ceteris paribus assumption is true. This means that
All things other than price hold constant
Which of the following in generally not true of innovation/technological advances?
An overall reduction in the number of available jobs occurs
Which of the following is the best example of the law of supply?
As the price of real estate increases, builders construct more homes
The price of veal suddenly increases. As a result, Danielle begins eating more chicken, which is less expensive, but tastes just as good to her. In this case, Danielle's elastic demand is due to:
Availability of substitutes
As per his "broken window" parable, Frederic Bastiat believes that destruction is:
Bad for the economy
A factory makes all types of bicycles. As summer approaches, what will likely occur?
Bicycle demand will increase, as will factory production (supply)
Ultimately, the main factor that drives decisions about production is the
Business' desire to maximize profits
In a certain country, the price of gasoline increases dramatically. At first, most people continue to pay the extra price, but after a while consumers begin to adjust their habits to drive less than previously. This situation of inelastic demand followed by elastic demand is an example of:
Change over time
Which of the following is not a substantive determinant of supply?
Climate variation
An increase in the price of pancakes may cause a decline in the purchase of maple syrup, which are _________.
Complementary goods
Athletes who purchase running shoes typically buy athletic socks to wear with the shoes. Athletic shoes and socks are:
Complements
What information is needed for a business to make a production decision "at the margin"?
Cost to produce each unit
What does the expression ³the customer is king´(consumer sovereignty) mean in a free market economy?
Customers have the power to decide what/how much of goods and services get produced, and are the reason for the existence of business
In general, as prices increase, demand for a product ______.
Decreases
The attachment to this question is a portrayal of a:
Demand curve
____ is a graphical representation of the relationship between product price and the quantity of the product demanded.
Demand curve
The price of steak and the price of milk each go up by 30%. What will most likely happen to the demand for each product?
Demand for steak will fall more than the demand for milk
If there are many substitutes available, what will best describe the demand for a particular product or service?
Demand is elastic
Businesses often use information such as age, income level, ethnicity, gender, and occupation to sell products to certain groups of people. What is this type of information called?
Demographics
Which of these must consumers possess in order to have effective demand for a product or service?
Desire and purchasing power for the product or service
When did the United States first implement a social welfare/benefits system on a large scale?
During the Great Depression
____ is demonstrated when a rise or fall in price greatly affects the amount of a product or service people are willing to buy.
Elastic demand
________ refers to the degree to which consumers/producers change their demand/supply in response to price change, i.e., price sensitivity.
Elasticity
A consumer's demand for a product or service is inelastic if that consumer considers the product/service to be:
Essential
Which of the following conditions is indicated by a supply curve shift to the left?
Federal and state governments increased taxes on businesses
If the price of a product or sevice rises but income level remains the same or even decreases, what is the effect on the quantity demanded?
Fewer products or services are bought
__________ states that if one factor of production (e.g., number of workers) is increased while other factors (e.g., machines and workspace) are held constant, the output per unit of the variable factor will eventually diminish.
Law of Diminishing Returns
______ explains how people react to changing prices in terms of the quantities of a product or service that they purchase.
Law of demand
_________states that as a person increases consumption of a product, there is a decline in the utility that person derives from consuming each additional unit of that product.
Law of diminishing marginal utility
____ states that, all other factors being equal, as the price of a product or service increases, the quantity of products or services offered by suppliers increases, and vice versa.
Law of supply
Which of the following has little or no effect on elasticity of demand?
Location of product manufacture
Consider the meanings of the words "variable" and "fixed." Which of the following costs of running a company do you think is a fixed cost rather than a variable cost?
Monthly mortgage on the property where the business is located
When there is a decrease in the quantity demanded, and price is the only factor affecting demand, what type of movement will the demand graph display?
Movement along the curve to a higher price
A much-needed traffic tunnel is built in Staten Island to facilitate rush hour traffic, but citizens who live near the tunnel entrances and exits complain to local politicians that the noise of automobile traffic is disturbing their neighborhood. The noise is an example of a:
Negative externality
Why do people need to buy and sell products and/or services?
No one is self-sufficient
Due to an increase in his car insurance, Michael needs to reduce his spending on other items. Which of the following types of products will he consume less?
Normal goods
Driving rather than flying to Charleston, South Carolina for spring break when the price of airline tickets increases is an example of the:
Substitution effect
_____ describes the total amount of a specific product or service that is available to consumers.
Supply
The attachment to this question is a portrayal of a:
Supply curve
___ is a graphical representation of the relationship between product price and quantity of product that a seller is willing and able to supply.
Supply curve
Automobile manufacturers install new robotic machinery to build vehicles. As a result, cars can be manufactured much more quickly and efficiently, and the factories can produce many more cars than before. This is an example of growth caused by:
Technology
Which of the following conditions is indicated by a supply curve shift to the right?
The availability of raw materials used by producers has increased, making them less expensive
Which of the following best describes a centrally planned economy?
The central government makes most (if not all) economic decisions
A company that makes kitchen appliances is underutilizing its recourses. What does this mean?
The company is producing fewer appliances than it could be
In general, as prices decrease, demand for a product ______.
Increases
The price of air conditioners rises. According to the law of supply, manufacturers will respond to this price increase by:
Increasing air conditioner production
A sudden increase in fuel costs sparks a rise in both prices and demand for fuel-efficient cars. Yet it takes months for car companies to manufacture more of these cars. In this case, the near-term supply for cars is:
Inelastic
____ is demonstrated when a rise or fall in price has minimal affect on the amount of a product or service people are willing to buy.
Inelastic demand
Mrs. Lambert receives a salary increase and decides to buy custom-made clothing instead of much less expensive store-bought clothes. Which phrase describes what store-bought clothes are for Mrs. Lambert?
Inferior goods
The United States economy is a mixed economy because:
It is based on a free market, but allows some government intervention
Why is demand for medicine inelastic?
It is considered a necessity, not a luxury
When a portion of one's salary is withheld as a payroll deduction for the Social Security system, what happens to the money that is withheld?
It is redistributed as cash transfers to retired and disabled people
How does new technology generally affect production?
It lowers cost and increases supply
How can specialization - either in manufacturing or in the career choices of people - benefit an economy?
It makes production more efficient
A clothing factory produces both sweaters and scarves. If it wishes to make more sweaters, what is the trade-off?
It must produce fewer scarves
Which of the following is one way that the United States Constitution protects the free enterprise system?
It recognizes and protects private property rights
When the price of a product decreases greatly, how do producers respond?
Some produce less, and others leave the market
Higgins, Inc. is considering using e-mail PDF attachments instead of shipping printed materials to its customer base. How will this move affect the product and services offered by Higgins, Inc.?
It should lower costs and increase supply
On a production possibilities graph, what does the curve known as the production possibilities frontier signify?
It shows how much can be produced so resources are used more efficiently
If a business significantly raises the price of a product with high elasticity of demand, what will almost assuredly happen to total revenue?
It will decrease
How can expectations about the future change consumer behavior?
Immediate demand for a product will rise if its price is expected to rise.
____ is the change in an individual's income and how that change affects the quantity demanded of a product or service.
Income effect
If prices are increasing rapidly, producers are likely to:
Increase supply
Your local public television station has a campaign to raise funding for the year. You do not contribute, but you still watch television shows that are broadcasted by the station. What is this situation called?
Free rider problem
What does elasticity of demand measure?
How the demand of buyers of a particular product or service will change when price rises or falls
In economic terms, if you choose between buying a new car and investing money in stocks, the value of the one you do not choose is the ______ of your decision.
Opportunity cost
Which of the following is an example of a business trying to increase its human capital?
Paying for employees' education
A pizza oven is an example of which "factor of production"?
Physical capital
Which of these events would indicate a movement along a supply curve for pizza?
Pizzerias raise the price of a slice of pizza from $2 to $3
Which of the following does not substantively determine demand?
Political perspective
If prices are declining, producers are likely to:
Reduce supply
Why does every decision involve the concept of "trade-offs"?
Resources are limited
A socialist economy is more flexible than a communist economy because:
Some free market practices are combined with some central economic planning
What does a company learn by knowing the elasticity of demand for its products?
Whether high prices will increase or decrease total revenue
