Economics practice exam
When economists refer to a market demand curve they mean that it represents
The horizontal summation of Individual demand curves
Which are positive statements 1. Main Street needs more coffee shops 2. A new parking garage on campus will reduce parking congestion 3. Last winter the state should have spent more money on snow removal
2 only
marginal analysis would put an emphasis on
Additional costs and benefits
If a store sells a good with a highly elastic demand then a decrease in the price would lead to
An increase in total revenue
Which concept would be addressed with microeconomics A the nation unemployment rate B the reasons for a decline in a country's total output C the price of college tuition that an individual student pays D inflation rate in brazil
C
A market economy is also known as a. economy and decisions are made by.
Capitalist: private individuals
Suppose the equilibrium price for a gallon of milk is 2.50 but due to government price supports the minimum legal price is 2.75 per gallon. This price floor:
Causes a surplus of milk in the market
Tax burdens are higher on consumers when
Demand is inelastic and supply is elastic
When market failure occurs it often creates an incentive for
Government intervention into the market
The more responsive buyers are to a change in price, the
Greater the price elasticity if demand
Willingness to pay is the
Highest value that a customer believes a good or service is worth
Which is not considered a basic economics question
How will the system accommodate change
A basic belief of economics is that
In general people respond to economic incentives
Suppose your income falls from 35000 to 33000 and that you quantity demanded of a good increases from 40 units to 55. The food is said to be
Inferior good
When quantity demanded in a market equals quantity supplied then the
Market is in equilibrium
Producer surplus is the difference between the
Market price and the minimum price the seller is willing to accept
Which of these is NOT a factor of production
Money
A country operating outside of production possibilities frontier is
Operating impossibly because a country cannot operate outside the production possibilities frontier
The price elasticity if demand measures the
Percentage change in quantity demanded divided by the percentage change in price
An effective price ceiling leads to
Quantity demanded exceeding quantity supplied
When an economy is operating efficiently the production of one more unit of a good will result in some loss of production of another good because
Resources are limited and efficiency implies that all resources are already in use
When quantity supplied exceeds quantity demanded a. occurs and prices are pushed. Toward equilibrium
Surplus: down
Which example represents incentives for decisions
Tax deductions for individual retirement accounts Investment tax credits for businesses Tax deductions for education savings accounts
A common definition of economics is
The allocation of scare resources to satisfy competing wants.
The basic idea of opportunity cost is that:
The decision to use resources in one activity means that the resources can not be used elsewhere
In a market based economy scarce resources are allocated by
The price system
At any price below the equilibrium price
The quantity demanded exceed the quantity supplied in the market
If a price ceiling is set above the equilibrium price in the market producer surplus will be
The same as it would be without the price ceiling
When markets are efficient
The sum of consumer and producer surplus is maximized
Tax incidents is defined as
Who bears the burden of a federal or local tax
Capital includes all of these EXCEPT
dollar bills in a bank vault