HCM 402 Module 1-6 Quizes
If U.S. auto manufacturers cut the prices of their vehicles to sell a greater quantity, buyers may assume that the lower price implies _____________ compared to foreign manufactured vehicles.
A lower quality
What do economists call a product whose demand rises when income rises, and falls when income falls? Complement Inferior good Substitute Normal good
A product whose demand rises when income rises, and vice versa, is called a normal good.
Which would not lead to an increase in prices of corn in the United States? A medical report citing new health benefits from consuming corn A U.S. government ban on imports of oats (a substitute of corn) A record corn crop in corn-producing states A drought in corn-producing states
A record corn crop in corn-producing states would increase supply, resulting in lower corn prices.
The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display: A) Allocative Efficiency B) The production Possibilities Frontier C) Trade-Offs D) Scarcity
A) Allocative Efficiency
When economists are sketching examples of a demand or supply curve that is close to horizontal, they refer to that demand or supply curve as ____________. A) Elastic B) Inelastic C) Having Zero Elasticity D) Price Inelasticity
A) Elastic
If the supply curve for a product is vertical, then the elasticity of supply is: A) Equal to zero B) Equal to 1 C) Greater than 1 but less than infinity D) Equal to infinity
A) Equal to zero
The _____ is the only price where quantity demanded is equal to quantity supplied A) Equilibrium Price B) Horizontal Axis Intercept C) Vertical Axis Intercept D) Market Price
A) Equilibrium Price
The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. IN order to boost ticket revenues, an economist would advise: A) Increasing the price of game tickets because demand is inelastic B) Not changing the price of game tickets because demand is unit elastic C) Increasing the price of game tickets because demand is elastic D) Decreasing the price of game tickets because demand is elastic
A) Increasing the price of game tickets because demand is inelastic
Which of the following best describes a monetary policy tool? A) Interest Rates B) Taxes C) Household Savings D) Government Spending
A) Interest Rates
Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy: A) Is not using it resources efficiently B) Is using it resources efficiently while producing clothing but not food C) Is using its resources efficiently while producing food but not clothing D) Is using its resources efficiently to produce both food and clothing
A) Is not using its resources efficiently. We can see this because the points are not even on the curve.
Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. A) Normative Statement B) Budget Constraint C) Trade-off D) Opportunity Cost
A) Normative Constraint
The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the __________, a diagram which shows what choices are possible A) Opportunity Set B) Consumption Choice C) Time Value of Money D) Risk Premium
A) Opportunity Set
Refer to Figure 4-1. The movement from ____ to ____ is consistent with a decrease in the price of cotton (a substitute) A) Point A; Point H B) Point A; Point D C) Point A; Point F D) Point A; Point B
A) Point A; Point H
A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of: A) The Supply Curve B) The demand curve, as consumers try to economize because of the shortage C) Both the supply and demand curves D) The supply curve and a rightward shift on the demand curve, resulting in a higher equilibrium price
A) The Supply Curve
If cola and iced tea are good substitutes for consumers, then it is likely that A) Their cross price elasticities are greater than zero B) Their price elasticities of demand are less than one C) Their income elasticities are less than zero D) Their price elasticities of supply are less than one
A) Their cross price elasticities are greater than zero
According to the Law of Supply A) There is a direct relationship between price and the quantity supplied B) There is an inverse relationship between the price and the quantity supplied C) There is a direct relationship between price and quantity demanded D) There is an inverse relationship between price and quantity demanded
A) There is a direct relationship between price and the quantity supplied
The general pattern that consumption of the first few units of any good tends to bring a higher level of ______ to a person that consumption of later units is a common patterns A) Utility B) Marginal Benefit C) Opportunity Cost D) Sunk Costs
A) Utility
Which are concepts that Adam Smith first introduced in his 1776 book The Wealth of Nations
Adam Smith introduced the ideas of division and specialization of labor
Refers to the problem in which the buyers of insurance have more information about whether they are high-risk or low-risk than the insurance company does.
Adverse Selection
The problem of ________________ in insurance markets is that insurance companies are unable to ______________ .
Adverse Selection; Differentiate those with low and high risks
Refer to Table 4-1. If D1 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are __________ and __________, respectively. $4; 11 $4; 16 $6; 13 $8; 15
$4;16
Which is a correct explanation for changes in revenue based upon unitary elastic demand? % change in Qd = % change in P % change in Qd > % change in P % change in Qd < % change in P % change in Qd < % change in P
% change in Qd =% change in P
Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve? 0.1 0.8 1.0 10.0
1.0 Know the Formula
Which of the following best denotes the reason for the existence of substantial black markets? A market oriented economy A command economy Government laws and rules The micro-economy
A command economy
Refers to a situation where both parties involved in an economic transaction have an unequal amount of information (one party knows much more than the other).
Asymmetric Information
After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. Demand curve for beef from Canada is: A) No change; Only the supply curve is likely to be affected B) A shift of the demand curve for beef to the left C) A movement down along the demand curve for beef to the right D) A shift of the demand curve for beef to the right
B) A shift of the demand curve for beef to the left
Any given demand or supply curve is based on the ceteris paribus assumption that A) Everything is variable B) All else is held equal C) No one knows which variables will change and which will remain constant D) What is true for the individual is not necessarily true for the whole
B) All else is held equal
The term "ceteris paribus" means that A) Everything is Variable B) All variables except those specified are constant C) No one knows which variables will change and which will remain constant D) What is true for the individual is not necessarily true for the whole
B) All variables except those specified are constant
Many cooks view butter and margarine to be substitutes. If the price of butter rises, then in the market for margarine: A) The equilibrium price will fall and the equilibrium quantity will fall B) Both the equilibrium price and quantity will rise C) The equilibrium price will rise and the equilibrium quantity will decrease D) The equilibrium price will rise, while the change to equilibrium quantity is indeterminate
B) Both the equilibrium price and quantity will rise
Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories. A) Financial Capital Market B) Circular Flow Diagram C) Financial Investment Market D) Specialization Model
B) Circular Flow Diagram
When demand is inelastic A) Price elasticity of demand is greater than 1 B) Consumers are not very responsive to changes in price C) The percentage change in quantity demanded resulting from a price change is greater than the percentage change in price D) Demand curves appear to be fairly flat
B) Consumers are not very responsive to changes in price
In countries like ________ the command economy predominates A) China and Vietnam B) Cuba and North Korea C) South Africa and Kenya D) Germany and France
B) Cuba and North Korea
Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change. A) Market B) Economy C) Production D) Firm
B) Economy
If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as : A) Excess Supply B) Excess Demand C) Ceteris Paribus D) A Price Ceiling
B) Excess Demand
Demand is said to be _____ when the quantity demanded is not very responsive to changes in price A) Independent B) Inelastic C) Unit Elastic D) Elastic
B) Inelastic
Scarcity Implies That A) Consumers would be willing to purchase the same quantity of a good at a higher price B) It is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available C) At the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce D) Consumers are too poor to afford the goods and services available
B) It is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available
If a firm faces _________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase A) Higher Demand B) Lower Costs of Production C) Equilibrium D) A Shift in Demand
B) Lower Costs of Production
____________ refers to the total number of units that are purchased at that price A) Quantity B) Quantity Demanded C) Supply D) Market Quantity
B) Quantity Demanded
If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to: A) Rise and the equilibrium quantity to fall B) Rise and the equilibrium quantity to stay the same C) Rise and the equilibrium quantity to rise D) Stay the same and the equilibrium quantity to fall
B) Rise and the equilibrium quantity to stay the same
The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options A) Marginal Utility B) Sunk Costs C) Marginal Analysis D) Budget Constraints
B) Sunk Costs
If new manufactures enter the computer industry, then (Ceteris Paribus): A) The supply curve shifts to the left B) The supply curve shifts to the right C) The demand curve shifts to the left D) Some established manufacturers must exit the industry
B) The supply curve shifts to the right
Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel? A) There is an increase in the cost of producing steel, which shifts the supply curve of steel to the right, thereby increasing the price of steel B) There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel C) There is a decrease in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel D) The increase in wage costs will shift the demand curve for steel to the left, increasing the cost of steel
B) There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel
What will happen to the equilibrium price and quantity for complement goods (oil, windshield wiper fluid, etc.) at convenience stores that sell gasoline, but not diesel fuel, in the downtown district on Monday, Tuesday, Wednesday, and Thursday? The equilibrium price will go up, and the equilibrium quantity will go down. The equilibrium price will go down, and the equilibrium quantity will go up. Both the equilibrium price and quantity will go down. Both the equilibrium price and quantity will go up.
Both the equilibrium price and quantity will go down. The demand for complement goods will shift leftward, resulting in both the equilibrium price and quantity going down.
Several major Asian and European cities have begun restricting vehicular travel to reduce congestion and/or pollution. Several methods have been used to accomplish these objectives, including requiring special permits for vehicles traveling during peak hours and limiting driving days according to license plate numbers (even and odd numbered vehicles may drive on alternating days). The City of Anytown, FL passed an ordinance that gasoline-powered vehicles with odd-numbered license plates may only drive in the downtown district on Mondays, Wednesdays, and Fridays, and gasoline-powered vehicles with even-numbered license plates may only drive in the downtown district on Tuesdays, Thursdays, and Fridays. Diesel and electric-powered vehicles may drive in the downtown district without restriction. What will happen to the equilibrium price and quantity for gasoline in the downtown district on Monday, Tuesday, Wednesday, and Thursday? The equilibrium price will go down, and the equilibrium quantity will go up. The equilibrium price will go up, and the equilibrium quantity will go down. Both the equilibrium price and quantity will go down. Both the equilibrium price and quantity will go up.
Both the equilibrium price and quantity will go down. The demand for gasoline will shift leftward, resulting in both the equilibrium price and quantity going down.
What will happen to the equilibrium price and quantity for diesel or electric-powered vehicles in the commuting area of Anytown, FL? Both the equilibrium price and quantity will go up. The equilibrium price will go down, and the equilibrium quantity will go up. The equilibrium price will go up, and the equilibrium quantity will go down. Both the equilibrium price and quantity will go down.
Both the equilibrium price and quantity will go up. The demand for diesel or electric-powered vehicles will shift rightward, resulting in both the equilibrium price and quantity going up.
On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be? Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate. Low income workers will be better able to survive the recession at the new, higher wage rate. More people will be hired at the higher wage rate offsetting the effects of the recession. The higher wage will increase the supply of labor offsetting the effects of the recession.
Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.
________ have incentives to create mechanisms that will allow them to make mutually beneficial transactions even in the face of ____
Buyers and sellers; Imperfect information
_____________________ have incentives to create mechanisms that will allow them to make mutually beneficial transactions even in the face of _____________________. Manufacturers; adverse selection Buyers and sellers; imperfect information Retailers; adverse selection Retailers; imperfect information
Buyers and sellers; imperfect information
Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is: A) 10 points on the economics exam B) 8 points on the history exam C) 7 points on the economics exam D) 12 points on the economics exam
C) 7 points on the economics exam
Which of the following will not result in a rightward shift of the market supply curve for labor? A) A decrease in non-wage income B) An increase in the working-age population C) An increase in labor productivity D) An increase in immigration
C) An increase in labor productivity
Why is there scarcity? A) Because the opportunity set determines this B) Because theory dictates it C) Because our unlimited wants exceed our limited resources D) Because human wants are limited
C) Because our unlimited wants exceed our limited resources
The slope of the ______ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good A) Personal Preference B) Utility Level C) Budget Constraint D) Opportunity Set
C) Budget Constraint
The slope of the _______ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good A) Opportunity Cost B) Productive Efficiency C) Budget Constraint D) Production Possibilities Frontier
C) Budget Constraint
When _________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift tot he right A) Prices rise B) Equilibrium is achieved C) Costs of production falls D) There is a population increase
C) Costs of production falls
The law of ________ explains why people and societies rarely make all-or-nothing choices A) Consumption B) Marginal Analysis C) Diminishing Marginal Utility D) Utility
C) Diminishing Marginal Utility
A term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines A) Skill B) Specialization C) Economies of Scale D) Division of Labor
C) Economies of Scale
Refer to Table 4-1. Suppose that D2 and S1 are the prevailing demand and supply curves for a product. If the demand schedule changes from D2 to D1, then: A) Equilibrium price increases from $6 to $8 B) Equilibrium quantity increases from 13 to 18 C) Equilibrium quantity decreases from 15 to 13 D) Equilibrium price decreases from $6 to $4
C) Equilibrium quantity decreases from 15 to 13
In the ________, households receive goods and services and pay firms for them
C) Goods and services market
A perfectly elastic curve is A) Upward sloping to the right B) Downward sloping to the left C) Horizontal D) Vertical
C) Horizontal
The longer the time period considered, the more elasticity of supply tend to: A) Decrease B) Remain Constant C) Increase D) Converge to zero
C) Increase
Improvements in the productivity of labor will tend to: A) Decrease wages B) Decrease the supply of labor C) Increase wages D) Increase the supply of labor
C) Increase Wages
If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________. A) Increases; Remain Constant B) Increases; Rise C) Increases; Fall D) Decreases; Fall
C) Increases; Fall
In the _______, households work and receive payment form firms A) Financial Investment Market B) Financial Capital Market C) Labor Market D) Savings Market
C) Labor Market
When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being: A) Balanced budget B) Prudent monetary policy C) Low inflation D) Assuring competition between firms
C) Low inflation
A 10% increase in income leads to a 15% decrease in the quantity of macaroni and cheese demanded but no change in the price of macaroni and cheese. From this information, we can assume A) Macaroni is a normal good and price elasticity of demand is greater than 1 B) Macaroni is an inferior good and price elasticity of supply is equal to zero C) Macaroni is an inferior good and price elasticity of supply is infinite D) Macaroni is an inferior good and price elasticity of demand is less than 1
C) Macaroni is an inferior good and price elasticity of supply is infinite
The basic difference between macroeconomics and microeconomics is A) Microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (Individual markets) B) Macroeconomics is concerned with groups of individuals while microeconomics is concerned wit h single countries C) Microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets) D) Macroeconomics is concerned with generalization while microeconomics is concerned with specialization
C) Microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (Aggregate markets)
The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in A) Quantity Supplied B) The slope of the demand curve C) Price D) The slope in the supply curve
C) Price
__________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling A) Rent Controls B) Price Ceilings C) Price Floors D) Subsidies
C) Price Floors
Whenever there is a shortage at a particular price, the quantity sold at that price will equal A) The quantity demanded at that price B) the quantity supplied minus the quantity demanded C) The quantity supplied at that price D) (Quantity demanded plus quantity supplied)/2
C) The quantity supplied at that price
In deciding how many hours to work, Beulah will make a choice that maximizes her ______; that is, she will choose according to her preferences for leisure time and income A) Budget Constraint B) Opportunity Set C) Utility D) Production Possibilites Frontier
C) Utility
Specialization
Can lead to an increase in overall production
In either a supply or demand curve, occurs when a price change of 1% results in a quantity change of 1%.
Constant Unitary Elasticity
Which types of elasticity will be represented by a curved line? Perfect inelasticity Zero elasticity Constant unitary elasticity Infinite elasticity
Constant Unitary Elasticity
The amount that individuals would have been willing to pay, minus the amount that they actually paid
Consumer Surplus
An insurance policyholder must pay a _______________ for each ______________ service, before insurance covers the rest.
Copayment; Insured
A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that: elasticity of demand for potato chips is 3. cross-price elasticity of demand for soda is -3. elasticity of demand for potato chips is 3. elasticity of demand for soda 3.
Cross-Price Elasticity of Demand for soda is -3
A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that: elasticity of demand for soda 0.5 and is inelastic. elasticity of demand for iced tea is 2 and is elastic. cross-price elasticity of demand for soda is -0.5. cross-price elasticity of demand for iced tea is +2.
Cross-Price Elasticity of demand for iced tea is +2
Refer to Table 4-1. If D1 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are __________ and __________, respectively. A) $4; 11 B) $4; 16 C) $6; 13 D) $8; 15
D) $8; 15
The United States has approximately ________ credit card holders A) 1.8 million B) 18 million C) 80 million D) 180 million
D) 180 Million
Which of the following is most likely a topic of discussion in macroeconomics A) An increase in the price of a hamburger B) A decrease in the production of DVD players by a consumer electronics company C) AN increase in the wage rate paid to automobile workers D) A decrease in the unemployment rate
D) A decrease in the unemployment rate
Which of the following results in a rightward shift of the market demand curve for labor? A) A decrease in labor productivity B) A decrease in the firm's product price C) An increase in the wage rate D) An increase in demand for the firm's product
D) An increase in the demand for the firm's product
Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect A) Andy's demand for pizza to increase B) Andy's demand for pizza to decrease C) Andy's quantity of pizza demanded to decrease D) Andy's demand for beer to increase
D) Andy's demand for beer to increase
The nature of demand indicates that as the price of a good increases: A) Suppliers wish to sell less of it B) More of it is produced C) More of it is desired D) Buyers desire to purchase less of it
D) Buyers desire to purchase less of it
Refer to Table 4-1. Suppose that D1 and S1 are the prevailing demand and supply curves for a product. If the demand schedule changes from D1 to D2 then A) Equilibrium price decreases from $6 to $4 B) Equilibrium quantity decreases from 15 to 13 C) Equilibrium quantity increases from 13 to 18 Equilibrium price increases from $6 to $8
D) Equilibrium Price increases from $6 to $8
Scarcity exists because of A) The Market Mechanism B) Specialization and Division of Labor C) The Allocation of Goods by Prices D) Unlimited wants and Limited Resources
D) Limited Resources
Refer to Figure 2-1. The most inefficient point depicted is: A) Point A B) Point C C) Point D D) Point G
D) Point G
Price elasticity of demand is defined as A) The slope of the demand curve B) The slope of the demand curve divided by the price C) The percentage change in price divided by the percentage change is quantity demanded D) The percentage change in the quantity demanded by the percentage change in price
D) The percentage change in quantity demanded divided by the percentage change in price
When quantity demanded decreases in response to a change in price A) The demand curve shifts to the right B) The demand curve shifts to the left C) There is a movement down along the demand curve D) There is a movement up along the demand curve
D) There is a movement up along the demand curve
The loss in social surplus that occurs when the economy produces at an inefficient quantity
Deadweight Loss
The labor ____________ curve(s) will shift _______________ if there is an increase in productivity or an increase in the demand for the final product. demand; left supply; left demand; right supply; right
Demand;Right
In the first chapter of The Wealth of Nations, Smith introduces the idea of the _______, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. Division of Labor Interconnected Economy Task Economy Modern Economy
Division of Labor
Although perfectly elastic supply curves are unrealistic, some goods have highly elastic supply curves. Which is an example of a good with a highly elastic supply curve? Custom hand-made furniture Diamond rings Gasoline Donuts
Donuts
The economy is getting as much benefit as possible from its scarce resources, and all the possible gains from trade have been achieved is
Efficiency in the demand and supply model
Demand is said to be ___________ when the quantity demanded is very responsive to changes in price. elastic unit elastic inelastic independent
Elastic
Occurs when the elasticity is greater than one, indicating a high responsiveness to changes in price.
Elasticity of Demand
The point where the supply curve and demand curve intersect.
Equilibrium
Occurs when the amount of the product consumers want to buy (quantity demanded) is equal to the amount producers want to sell (quantity supplied)
Equilibrium quantity
The circular flow diagram of economic activity
Flow of goods, services, and payments between households and firms
Automobile manufacturers use warranties as incentives for buyers to purchase their products. Why are warranties on vehicles important to buyers?
For a specific time period, the manufacturer bears the cost of fixing or replacing the vehicle
Which of the examples are inelastic? Beer Gasoline Restaurant meals Housing Personal computers and tablets
Gasoline and Housing
In a command economy, the _____ either makes most economic decisions itself or at least strongly influences how the decisions are made. Government Market Firm Business Sector
Government
Which is an example of a price floor? Prescription drugs pricing Automated Teller Machine (ATM) fees Rent controls Government-mandated minimum wage
Government-mandated minimum wage Government-mandated minimum wage requirements are price floors, because they prevent wages from being lower than a predetermined level.
With regard to the provision of health insurance in the United States, which of the following is regarded as a way of addressing moral hazard and adverse selection problems? reducing profit margins for insurance companies increasing profit margins for insurance companies reduced government involvement greater government involvement
Greater Government Involvement
The goal of the ______________________ is to improve competition in the market for health insurance.
Health Insurance Exchange
The best way to describe economics is that it is the study of ______
How decisions are made Economics is the study of decision making
Which is true about tax incidence? If demand is more inelastic than supply, sellers bear much of the tax burden. The tax burden is equally shared by consumers and sellers. If demand is more inelastic than supply, consumers bear much of the tax burden. If supply is more inelastic than demand, consumers bear much of the tax burden.
If demand is more inelastic than supply, consumers bear much of the tax burden.
Which factors can shift the supply of financial capital to a certain investment? Select all that apply. If people want to alter their existing levels of consumption If the riskiness or return on one investment changes relative to other investments Usury laws Consumer confidence Business confidence
If people want to alter their existing levels of consumption If the riskiness or return on one investment changes relative to other investments There are two factors can shift the supply of financial capital to a certain investment: if people want to alter their existing levels of consumption, and if the riskiness or return on one investment changes relative to other investments.
The supplier of a computer game is willing to supply 2,500 units at $50 each, but is willing to supply 3,500 units at $60. Calculate the Price Elasticity of Supply rounded to two decimal places. Which statements are correct? If the price increases 10%, supply will increase 18.3%. If the price increases 10%, supply will increase 10%. The supply is elastic. If the price increases 10%, supply will decrease 18.3%. The demand is inelastic.
If the price increases 10%, supply will increase 18.3%. — Correct. The elasticity of supply is 1.83; therefore, if the price increases 10%, supply will increase 18.3%. The supply is elastic. — Correct. The elasticity of supply is 1.83; therefore, supply is elastic. Know the Formulas
Which statement about the elasticity of savings is true? If the supply curve for financial capital is highly inelastic, then a percentage increase in the return to savings will cause only a small increase in the quantity of savings. If the supply curve for financial capital is highly inelastic, then a percentage increase in the return to savings will cause a higher increase in the quantity of savings. If the supply curve for financial capital is highly inelastic, then a percentage increase in the return to savings will not affect the quantity of savings. If the supply curve for financial capital is highly elastic, then a percentage increase in the return to savings will cause only a small increase in the quantity of savings.
If the supply curve for financial capital is highly inelastic, then a percentage increase in the return to savings will cause only a small increase in the quantity of savings.
Refers to a situation where either the buyer, the seller, or both, are less than 100% certain about the qualities of what is being bought and sold
Imperfect Information
A buyer confronted with _______________will often believe that the price being charged reveals something about the ____________ of the product.
Imperfect information; quality
Which statements describe the Affordable Care Act (ACA)? Impose other taxes, such as a 2.3% tax on manufacturers and importers of certain medical devices Increases the Medicare tax by 0.9% and adds a 3.8% tax on unearned income for high income taxpayers Imposes other taxes, such as a 2.3% tax on pharmaceutical products Requires employers with more than 25 employees to offer health insurance to their employees Mandates that all citizens and residents must have health insurance that matches set qualifications, and if a person does not have health insurance, the person will be fined Increases the Medicare tax by 3.8% and adds a 0.9% tax on unearned income for high income taxpayers
Impose other taxes, such as a 2.3% tax on manufacturers and importers of certain medical devices Increases the Medicare tax by 0.9% and adds a 3.8% tax on unearned income for high income taxpayers Mandates that all citizens and residents must have health insurance that matches set qualifications, and if a person does not have health insurance, the person will be fined
Which would cause a shift in the supply curve to the right (increase)? Improved technology Increased government regulation Higher product taxes Rise in unit prices
Improved technology would cause a shift in the supply curve to the right.
Improvements in the productivity of labor will tend to: decrease wages. decrease the supply of labor. increase wages. increase the supply of labor.
Increase Wages
If a website facilitates the sale of goods by individuals and business over the internet, but requires actual photos of every item for sale to be posted instead of a manufacturer's stock picture of the product, both the demand and supply of products in good condition will shift due to the improved information, causing quantity to ____ and price to ____
Increase;Increase
Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price. independent inelastic unit elastic elastic
Inelastic
The evidence on the supply curve of financial capital is controversial, but at least in the short run, the elasticity of savings with respect to the interest rate appears to be __________. elastic inelastic perfectly elastic negative
Inelastic
Refers to the extreme case in which either the quantity demanded (Qd) or supplied (Qs) changes by an infinite amount in response to any change in price at all.
Infinite or Perfect Elasticity
What will happen if the supply curve for financial markets moves to the left? The amount of money willing to be loaned will go up. The amount of money borrowed will go up. Interest rates will go up. Interest rates will go down.
Interest rates will go up
Mario's restaraunt has a budget for advertising each month. Each additional ad brings in less new customers than the previous ad. Marginal Analysis Law of Diminishing Marginal Utility Sunk Costs Opportunity Costs
Law of Diminishing Marginal Utility
In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. market-oriented economy macroeconomy microeconomy command economy
Market-oriented economy
For both the U.S. economy and global economy, what are the primary social mechanisms for answering the basic questions about what is produced, and for whom it is produced? Price floors Price ceilings Social surplus Markets—that is, demand and supply
Markets—that is, demand and supply Markets—that is, demand and supply—are the primary social mechanism for answering the basic questions about what is produced, and for whom it is produced.
The marginal benefit of a slice of pizza is the: total amount that a consumer is willing to pay for a whole pizza, divided by the number of slices difference between the value of the slice to the consumer and the price of the slice. maximum amount that a consumer is willing to pay for the slice. price of the slice of pizza
Maximum amount that a consumer is willing to pay for the slice
The basic difference between macroeconomics and microeconomics is:
Microeconomics concentrates on the behavior of the individual consumers and firms while macroeconomics focuses on the performance of the entire economy
One prominent U.S. study found that when people face ____________ for their health insurance, they consume about ________ medical care than people who have complete insurance. lower premiums and deductibles; one-quarter less moderate deductibles and copayments; one-third less higher premiums and deductibles; one-quarter more high deductibles and copayments; one-third more
Moderate deductibles and copayments; one-third less
Refers to the case in which people engage in riskier behavior with insurance than they would if they did not have insurance.
Moral Hazard
When people have insurance against a certain event, the notion that those people are less likely to guard against that event occurring is called a _____________________ .
Moral Hazard
The major problems caused by imperfect information in insurance markets are
Moral hazard and adverse selection
What do an optician and a lawyer share in common?
Need for a valid occupational license from government regulators
Which factors can cause a shift in labor supply? Select all that apply. Number of workers Technology Required education Price and availability of other inputs Demand for output
Number of workers Required education The number of workers and the required education will cause a shift in labor supply.
Which is not an example of an explicit reassurance that sellers provide? Guarantee Warranty Service contract Occupational license
Occupational Licenses
What is Jean Paul considering in the act of adjusting his budget to accommodate the purchase of the drafting table?
Opportunity Cost Opportunity costs are represented by Jean Paul's consideration of what must be given up in order for him to afford the drafting table.
The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.
Price
What type of price control is enacted in an attempt to keep prices low for those who demand the product?
Price Ceiling
The ratio between the percentage change in the quantity demanded (Qd) or supplied (Qs) and the corresponding percent change in price
Price Elasticity
The percentage change in the quantity demanded of a good or service divided by the percentage change in the price.
Price Elasticity of Demand
The percentage change in quantity supplied divided by the percentage change in price.
Price Elasticity of Supply
Which is a characteristic of a price floor? Select all that apply. Prices will not fall below a predetermined level. A surplus may exist. Quality is likely to deteriorate. A shortage may exist. Prices will not rise above a predetermined level.
Prices will not fall below a predetermined level. A surplus may exist. Surpluses and prices not falling below a predetermined level are characteristics of price floors.
The amount that a seller is paid for a good, minus the seller's actual cost
Producer Surplus
A demand curve shows the relationship between price and _________________ on a graph. quantity demanded quantity produced economies of scale costs
Quantity Demanded
What will happen when consumers and businesses have greater confidence that they will be able to repay debt in the future? Quantity demanded of financial capital at any given interest rates below (but not above) the equilibrium will shift to the left. Quantity demanded of financial capital at any given interest rate will shift to the right. Quantity demanded of financial capital at any given interest rate will shift to the left. Quantity demanded of financial capital at interest rates below (but not above) the equilibrium will shift to the right.
Quantity demanded of financial capital at any given interest rate will shift to the right. When consumers and business have greater confidence, quantity demanded of financial capital at any given interest rate will shift to the right.
Reba is deciding whether she should eat an additional half of a sandwich Marginal Analysis Law of Diminishing Marginal Utility Sunk Costs Opportunity Costs
Reba shows marginal analysis
The chef at a high-end French cuisine restaurant has accepted a job on a cruise liner. The restaurant owner must advertise for a replacement chef, but is concerned about reducing the amount of imperfect information respondents to the career ad will provide. This concern can best be addressed by
Requiring current resumes and recommendations
Sandra took an expensive cruise. In order to pay for it, she stopped her gym membership. Marginal Analysis Law of Diminishing Marginal Utility Sunk Costs Opportunity Costs
Sandra's gym membership is her opportunity cost.
Which factor drives the study of economics
Scarcity
Within 3 months of starting work at the book publishing company, Shawn has greatly increased his skill and speed at packaging books for shipping
Shawn is demonstrating specialization of labor
Occurs when the price is below equilibrium, so the quantity demanded is greater than the quantity supplied.
Shortage
The sum of consumer surplus and producer surplus
Social Surplus
Which example describes the primary regulator of the U.S. insurance industry? States National Association of Insurance Commissioners U.S. Congress Federal Deposit Insurance Corporation
States
If the supply curve for aspirin is perfectly elastic, then a reduction in demand will cause the equilibrium price to: stay the same and the equilibrium quantity to fall. fall and the equilibrium quantity to fall. rise and the equilibrium quantity to stay the same. rise and the equilibrium quantity to fall.
Stay the same and the equilibrium quantity to fall
Which statements about cross-price elasticity of demand are true? Substitute goods have positive cross-price elasticities of demand. Substitute goods have negative cross-price elasticities of demand. Complement goods have positive cross-price elasticities of demand. Both substitute goods and complement goods have positive cross-price elasticities of demand Complement goods have negative cross-price elasticities of demand. Both substitute goods and complement goods have negative cross-price elasticities of demand.
Substitute goods have positive cross-price elasticities of demand. Complement goods have negative cross-price elasticities of demand. Substitute goods have positive cross-price elasticities of demand, and complement goods have negative cross-price elasticities of demand.
Elijah's car needs expensive repairs. When Elijah was deciding whether to do them, he remembered that the car had cost him $20,000 Marginal Analysis Law of Diminishing Marginal Utility Sunk Costs Opportunity Costs
Sunk Cost
A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the __________________ . demand curve to the right supply curve to the left supply curve to the right demand curve to the left
Supply curve to the right
Occurs when the price is above equilibrium, so the quantity supplied is greater than the quantity demanded
Surplus
The __________________ goal was to reduce the adverse selection problem and keep prices down by requiring all consumers—even the healthiest ones—to have health insurance.
The Individual Mandate
Everyone in the Jackson family is equally good at baking, so they have begun selling pies at a local farmer's market. Mr. Jackson realizes they can be more productive if each member of the family does a different task associated with making the pies.
The Jackson family's pie enterprise is benefiting from the division of labor.
What do economists call the inverse relationship between price and quantity demanded? Demand curve Demand Law of demand Demand schedule
The Law of Demand
Which is a visual representation with a vertical and horizontal axis, depicting the relationships between price and quantity? Law of supply Demand schedule Law of demand Supply curve Demand curve Supply schedule
The demand curve and supply curve are both represented on graphs
The price of a new computer game has demand of 3,000 units at $50 and 2,500 units at $60. Calculate the Price Elasticity of Demand rounded to two decimal places. Which statements are correct? If the price decreases 10%, demand will decrease 10%. If the price increases 10%, demand will increase 10%. The demand is inelastic. The demand is unitary elastic. If the price increases 10%, demand will decrease 10%.
The demand is unitary elastic. — Correct. The elasticity of demand is 1.0; therefore, demand is unitary elastic. If the price increases 10%, demand will decrease 10%. — Correct. The elasticity of demand is 1.0; therefore, if the price increases 10%, demand will decrease 10%.
When buyers use ___________________ to draw inferences about the quality of products, then markets may have trouble reaching _________________ and quantity.
The market price; and equilibrium price
The peanut crop in the peanut-producing region of the United States has been infected with a fungus, requiring that most of the crop be destroyed. Which conclusions are true? The price of peanut butter will increase. The price of peanut butter will decrease. The price of jelly will increase. The price of hazelnuts (Nutella) will increase. The demand for cashews will decrease.
The price of peanut butter will increase. The price of hazelnuts (Nutella) will increase. The decrease in supply of peanuts will result in an increase in price for peanut butter, as well as an increase in demand for substitute goods, which will result in an increase in the price of hazelnuts (Nutella).
The U.S. government just issued a 1-year ban on the fishing or capture of wild oysters in the United States. Which conclusions are true? The price of wild oysters will increase. The price of clams will decrease. The price of mussels will increase. The demand for clams will decrease. The price of farm-raised oysters will decrease.
The price of wild oysters will increase. The price of mussels will increase. The price of wild oysters will increase, along with the price of mussels, which are a substitute good.
Macroeconomic topics do not usually include:
The profit maximizing decisions of an individual manufacture
When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________. the quantity demanded of financial capital at any given interest rate will remain unchanged. the quantity demanded of financial capital at any given interest rate will shift to the left. the quantity demanded of financial capital at any given interest rate will shift to the right. the quantity demanded of financial capital at any given interest rate will achieve equilibrium.
The quantity demanded of financial capital at any given interest rate will shift to the right
The residential construction market is beginning to recover in the states most affected by the housing crisis that began in 2007. Construction companies are finding it difficult to hire electricians, plumbers, carpenters, and other trades workers, because the workers displaced by the housing crisis moved to other states to find employment, or returned to school to learn other occupations. What will happen if construction companies offer higher wages or other incentives to attract qualified trades workers from other states? The supply curve will shift to the right. The demand curve will shift to the left. The supply curve will shift to the left. The demand curve will shift to the right.
The supply curve will shift to the right. The higher wages and incentives will attract qualified workers, resulting in the supply curve shifting to the right
Which is true about the wage elasticity of the labor market? The wage elasticity of labor supply for adult workers in their 30s and 40s is thought to be fairly elastic. The percentage change in wages divided by the percentage change in hours determines the shape of the labor supply curve. When wages move up or down by a certain percentage amount, the quantity of hours that adults in their prime working years are willing to supply changes by a greater percentage amount. The wage elasticity of labor supply for teenage workers is generally thought to be fairly elastic
The wage elasticity of labor supply for teenage workers is generally thought to be fairly elastic.
Opportunity costs involve what factor besides price? Tradeoff Utility Time Slope
Time When costs of time are involved, the opportunity cost can be more than just the price
Though it required an increase in workforce, Tiny House Manufacturers has expanded its level of production and can now manufacture each home more affordably and efficiently.
Tiny House Manufacturing is maximizing production and taking advantage of economies of scale.
In addition to creating an inefficient outcome, the imposition of a price floor or a price ceiling will also produce which surplus transfers?
Transfer some consumer surplus to producers. Transfer some producer surplus to consumers. The imposition of a price floor or a price ceiling will prevent a market from adjusting to its equilibrium price and quantity. An additional effect of price ceilings and floors is the transfer of some consumer surplus to producers, or some producer surplus to consumers.
Which may result in a shift in the demand curve to the left (decrease) of the good or service mentioned? Vacation travel during a period of decreased worker income, such as an economic recession Peanut butter, if the price of jelly goes down Rice, if the price of potatoes goes up Beef, if the price of chicken goes up Televisions, if there is an expectation that the price of a television will go down
Vacation travel and televisions A demand curve would shift to the left for televisions, if the expectation was that the price would go down, or if unemployment increased and work hours were reduced.
If the community colleges in the affected states all receive grants to train local residents in construction trades, what will happen to wages once the colleges begin graduating qualified trades workers? Wages will go down. The supply curve will shift to the left. Wages will go up. The demand curve will shift to the right.
Wages will go down The influx of additional trained trades workers will shift the supply curve for workers to the right, causing wages to decrease.
Refers to the extreme case in which a percentage change in price, no matter how large, results in zero change in quantity
Zero Elasticity
Jean Paul is a second year university architecture student on a very tight budget. Although a scholarship covers his tuition, books, dormitory and meals, he must budget tightly each week for his school supplies, entertainment, and clothing. His roommate is offering him a drafting table for a remarkably low price and allowing him to make payments over 4 weeks, but this will pinch his budget. However, having a drafting table in his room will save him the time and energy of using the drafting table of a friend who lives off campus, and it will give him more flexibility for completing his assignments.
opportunity set Jean Paul's opportunity set is represented by each of the opportunities he has for spending within his budget.
When Morty leased his new car, he was required by law to _________ to ______________ of financial loss caused by a vehicle collision. pledge collateral; reduce the chance pay extra for a warranty; eliminate the risk purchase insurance; reduce the risk receive a free service contract; eliminate any chance
purchase insurance; reduce the risk
