Lesson 1 & 2 & 3 Econ 304k Word problems, Lesson 4 5 6 Econ 304K, Lesson 7 8 9 Econ 304K
Diminishing marginal utility is __________.
an assumption of utility theory
U.S. producers decide to produce more compact cars and fewer SUVs as the price of gasoline rises. Producers are answering the ________ part of one of the two big economic questions. "what" "how" "when" "how many"
"what"
When a country decides to produce fewer bombers and more public housing projects, it is answering the ________ part of one of the two big economic questions. "how" "what" "defense" "for whom"
"what"
Ben thinks that playing another round of a video game is worth $1.00; to play another round costs Ben $0.50. Ben's consumer surplus from playing another round of the video game is __________. $1.50 $0 $0.50 $1.00
$0.50
To cover all her costs of production, Sarah knows that she must sell her sunflower seeds for $5.00 per bushel. She simply cannot accept any lower price and remain in business. When she sells all of her seeds for $5.50 per bushel, she earns a producer surplus equal to . $5.00 times the number of bushels produced zero $5.50 times the number of bushels produced $0.50 times the number of bushels produced
$0.50 times the number of bushels produced
You purchased a $50 ticket to a basketball game which is now sold out. Tickets to the game are being sold by those who have them for $100. Your opportunity cost in dollars of attending the basketball game is _____. $50 $100 $30 $150
$100
The schedules in the table give the marginal social benefit and marginal social cost of a DVD. At the efficient quantity, the minimum supply-price of a DVD is ________ and the value of a DVD is ________. $16; $24 $16; $20 $20; $16 $20; $20
$20; $20
After you graduate, you have decided to accept a position working at the Bureau of Labor Statistics for $33,000.00 a year. The other offers you received were for $28,000, $22,000, and $19,000. What is the opportunity cost of accepting the position at the Bureau of Labor Statistics? $19,000.00 $22,000.00 $69,000.00 $28,000.00
$28,000.00
Let QD stand for the quantity demanded, QS stand for the quantity supplied, and P stand for price. If QD = 20 − 2P and QS = 5 + 3P, then the equilibrium price is __________. $1 $2 $4 $3
$3
Suppose that Dave has $200 to spend per week and he buys only magazines and pizza. The price of a pizza is $10 and the price of a magazine is $5. What is Dave's real income in terms of magazines? $200 $20 $40 $10
$40
Junkfood Jill spends all of her income on jellybeans and Jolt cola. Suppose that Jill's income is $30, the price of a bag of jellybeans is $6, and the price of a bottle of Jolt cola is $2. If bags of jellybeans are graphed along the vertical axis and bottles of Jolt cola are graphed along the horizontal axis, what is the slope of the budget line? 1/3 −3 3 −1/3
-1/3
A 10 percent decrease in income decreases the quantity demanded of compact discs by 3 percent. The income elasticity of demand for compact discs is __________. 3.3 −0.3 0.3 10.0
0.3
A shift of the supply curve of oil raises the price of oil from $9.50 a barrel to $10.50 a barrel and reduces the quantity demanded from 41 million to 39 million barrels a day. The price elasticity of demand for oil is __________. 2.0 0.5 2 million barrels a day per dollar $1 per 2 million barrels a day
0.5
Lily is a college student who likes to buy only two goods: Cheetos and Pepsi. To determine how Lily can maximize her utility from consuming Cheetos and Pepsi, you need to know which of the following: I. Lily's preferences for Cheetos and Pepsi II. the respective prices of Cheetos and Pepsi III. Lily's income I, II, and III I only II and III I and II
1 2 3
Let QD stand for the quantity demanded, QS stand for the quantity supplied, and P stand for price. If QD = 20 − 2P and QS = 5 + 3P, then the equilibrium quantity is __________. 5 20 3 14
14
Which of the following is NOT a resource? vans used by a bakery company for deliveries 175 shares of Microsoft stock a person developing a production schedule for a new product wilderness areas that have yet to be developed
175 shares of Microsoft stock
The schedules in the table give the marginal social benefit and marginal social cost of a DVD. If the marginal cost of producing a DVD increases by $4, then the efficient number of DVDs is ________ a week. 1 2 5 4
2
Junkfood Jill spends all of her income on jellybeans and Jolt cola. Suppose that Jill's income is $30, the price of a bag of jellybeans is $6, and the price of a bottle of Jolt cola is $2. Which of the following combinations of jellybeans and Jolt cola lies inside Jill's budget line? 3 bags of jellybeans and 6 bottles of Jolt 4 bags of jellybeans and 4 bottles of Jolt 2 bags of jellybeans and 8 bottles of Jolt 5 bags of jellybeans and 0 bottles of Jolt
2 bags of jellybeans and 8 bottles of Jolt
Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and that a typical American factory can produce 10 cameras or one computer in an hour. Germany wishes to purchase computers from the US in exchange for cameras. What is the maximum number of cameras per computer that Germany would be willing to pay the US? 10 cameras 2 cameras 1 camera 20 cameras
20 cameras
Four people each have a different willingness to pay for one unit of a good: George will pay $15, Glen will pay $12, Tom will pay $10, and Peter will pay $8. If price is equal to $9 per unit then the quantity demanded in the market will be ________ and the consumer surplus for this unit will be ________. 3; $10 3; $37 3; $36 4; $8
3; $10
In the table, when x increases from 4 units to 6 units, y changes by units. x y 0 0 2 6 4 12 6 18 8 24 10 30 −2 −6 2 6
6
If the cross elasticity of demand between goods A and B is negative, __________. the demands for A and B are both price inelastic A and B are complements the demands for A and B are both price elastic A and B are substitute
A and B are complements
A line drawn along a 45° angle has special significance. What does it tell us about the values of x and y?
A line drawn along a 45 angle is a line where the value of y is equal to the value of x.
If the relative price of pizza in terms of movies is 3, this means that __________. the opportunity cost of a pizza is 3 movies in terms of the dollars that must be spent to buy the product, pizza is more expensive than movies 3 pizzas can be traded for 9 movies All of the above are correct.
All of the above are correct
Resource use is efficient if __________. the marginal benefit is equal to the marginal cost of the last unit produced the goods and services people value most highly are produced it is not possible to produce more of a good without giving up production of a good which is more highly valued All of the above are correct.
All of the above are correct.
Which of the following statements is true? At the efficient quantity, marginal social benefit equals marginal social cost. Marginal social cost increases as the quantity produced decreases. Marginal social benefit decreases as the quantity consumed decreases. If marginal social benefit exceeds marginal social cost by as much as possible, production is efficient.
At the efficient quantity, marginal social benefit equals marginal social cost.
Economic growth means ____________. an expansion of production an inward shift of the PPF an outward shift of the PPF Both answers a and c are correct.
Both answers a and c are correct.
Which of the following questions is NOT a microeconomic question? Can the Federal Reserve keep income growing by cutting interest rates? How would a tax on e-commerce affect eBay? What is Britney's opportunity cost of having another baby? Does the United States have a comparative advantage in information technology services?
Can the Federal Reserve keep income growing by cutting interest rates?
A reduction in the level of unemployment would have which effect with respect to the nation's production possibilities curve? It would not shift the curve; it would be represented by moving from a point inside the curve toward the curve It would not shift the curve; it would be represented by moving from a point on the curve to a point to the right of the curve It would shift the curve to the right It would shift the curve to the left
It would not shift the curve; it would be represented by moving from a point inside the curve toward the curve
Diminishing marginal utility means that __________. beyond a certain point, total utility decreases as income rises the total utility from one hamburger exceeds the total utility from two hamburgers Ralph will enjoy his second hamburger less than the first the price of two hamburgers is twice the price of one
Ralph will enjoy his second hamburger less than the first
What is a line's direction called?
Slope
If the production possibilities curve is a straight line, then: The society is capable of producing only one of the goods and not the other The society can produce more of both goods simultaneously The law of increasing opportunity costs does not apply The opportunity cost of producing one good is zero
The law of increasing opportunity costs does not apply
What does the slope tell you about a line?
The line's direction, given by the sign of the slope, tells you whether the variables have a positive or negative relationship. The relationship is positive if the slope is positive and negative if the slope is negative.
Explain what the magnitude of the slope means.
The magnitude of the slope can tell us about the tradeoff between the two variables.
When there is a high correlation between two variables, which of the following is INCORRECT? We can infer a causal relationship between the two variables. A scatter diagram of the two variables will indicate a strong relationship between the two variables. We can predict the value of one variable from the value of the other variable. None of the above; that is, they are all correct.
We can infer a causal relationship between the two variables
Which of the following is a normative statement? Popcorn and candy are sold in movie theaters. You should eat less candy. The price of candy bars is $1.25 each. Candy bars are more expensive than newspapers.
You should eat less candy
If demand is price elastic __________. a 1 percent decrease in the price leads to an increase in the quantity demanded that exceeds 1 percent a 1 percent increase in the price leads to an increase in the quantity demanded that exceeds 1 percent the price is very sensitive to any shift of the supply curve a 1 percent decrease in the price leads to a decrease in the quantity demanded that is less than 1 percent.
a 1 percent decrease in the price leads to an increase in the quantity demanded that exceeds 1 percent
A change in which of the following alters buying plans for cars but does NOT shift the demand curve for cars? a 10 percent decrease in the price of car insurance a 5 percent increase in people's incomes an increased preference for walking rather than driving a 20 percent increase in the price of a car
a 20 percent increase in the price of a car
Demonstrating how an economic variable differs across countries for a specific year is best illustrated by . a scatter diagram a time-series graph a cross-section graph none of the above, because any type of graph might mislead
a cross-section grap
Panasonic sends its HDTV salespeople to training sessions. This is an example of a macroeconomic decision. scarcity. a firm investing in workers' human capital. entrepreneurship.
a firm investing in workers' human capital.
A nation can consume at a point outside its PPF _________.
when it trades with other nations
A market demand curve is constructed by a horizontal summation of each individual demand curve. averaging each individual demand curve. dividing one individual demand curve by the number of consumers in the market. a vertical summation of each individual demand curve.
a horizontal summation of each individual demand curve.
The statement, "The unemployment rate for teens is higher than that for adults," is . a political statement an ethical statement a positive statement a normative statement
a positive statement
A price ceiling is __________. a price that creates a surplus of the good a price above which a seller cannot legally sell a price below which a seller cannot legally sell Both a and c are correct.
a price above which a seller cannot legally sell
If the quantity demanded exceeds the quantity supplied, then there is __________. a shortage and the price is below the equilibrium price a surplus and the price is below the equilibrium price a shortage and the price is above the equilibrium price a surplus and the price is above the equilibrium price
a shortage and the price is below the equilibrium price
A positive statement is . about what ought to be the result of a model's normative assumptions about what is valid only in the context of a model with simple assumptions
about what it is
Which of the following is an example of an economic choice? what kind of toothpaste to use how many hours to spend at a party how many television sets to produce all of the above
all of the above
Making choices at the margin _________. results in a good use of resources involves making decisions in increments is about comparing benefits and costs all of the above are correct
all of the above are correct
In 1998 there were 200,000 gas grills demanded at a price of $500. In 1999 there were more than 200,000 gas grills demanded at the same price. This increase could be the result of any of the following EXCEPT __________. a fall in the price of natural gas, a complement for a gas grill an increase in population an increase in the supply of gas grills an increase in income, if gas grills are a normal good
an increase in the supply of gas grills
An increase in Abigail's income decreases her demand for cassette tapes. For her, cassette tapes are __________. a complement to any good a normal good a substitute good an inferior good
an inferior good
If you hire 1 worker, he can produce 10 pretzels a day. If you hire a second worker, she can produce 8 more pretzels. If you hire a third worker, she can produce 6 more pretzels a day. A graph displaying this relationship between the number of employees on the horizontal axis and total pretzel output per day on the vertical axis shows ________. a negative linear relationship an upward-sloping curve that becomes less steep as employment increases a positive linear relationship a negatively-sloped curve that becomes less steep as employment as increases
an upward-sloping curve that becomes less steep as employment increases
The fundamental issue of economics is to .
analyze choices that must be made because of the scarcity of resources
Production efficiency is achieved _________. when production occurs inside the production possibilities frontier when all goods and services desired by consumers can be produced in the economy at the point of production at which producing one more unit of one good cannot occur without producing less of some other good when the ability is gained to produce goods and services that are desired beyond the PPF boundary
at the point of production at which producing one more unit of one good cannot occur without producing less of some other good
As a curve approaches a maximum point, the slope will ___________. be negative and then positive after the maximum point remain constant on either side of the maximum point be positive and then negative after the maximum point increase before and after the maximum point
be positive and then negative after the maximum point
When 2,000 hamburgers per day are produced, the marginal social benefit is $1.50 and the marginal social cost is $1.00. And when 7,500 hamburgers per day are produced, the marginal social benefit is $1.00 and the marginal social cost is $1.50. The efficient production quantity of hamburgers is ________ a day. more than 7,500 7,500 between 2,000 and 7,500 2,000
between 2,000 and 7,500
By increasing production per person, __________. productivity increases living standards increase prices rise Both answers a and b are correct.
both answers a and b are correct
In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, Bob can produce either 8 loaves of bread or 8 pounds of butter. We know that Andy has a comparative advantage in the production of _________. butter, while Bob has a comparative advantage in the production of bread both bread and butter bread, while Bob has a comparative advantage in the production of butter bread, and neither has a comparative advantage in the production of butter
bread, while Bob has a comparative advantage in the production of butter
Graphs __________. are always misleading because the numbers can be scaled to illustrate the desired result are never misleading because there is only one way to graph a numerical relationship are misleading any time there is a break in the axis can be misleading if you do not look closely at the values and labels on the axis
can be misleading if you do not look closely at the values and labels on the axis
A person has a comparative advantage in producing a particular good if that person _________. has more human capital related to that good than anyone else has less desire to consume that good than anyone else has higher productivity in producing it than anyone else can produce it at lower opportunity cost than anyone else
can produce it at lower opportunity cost than anyone else
The law of demand states that __________. changes in the quantity demanded of a good are inversely related to changes in its price changes in demand are related inversely to changes in supply changes in the quantity demanded of a good are not related to changes in the quantity supplied changes in demand are related directly to changes in supply
changes in the quantity demanded of a good are inversely related to changes in its price
Which of the following pairs of goods are substitutes for each other? peanut butter and gasoline compact discs and compact disc players lettuce and salad dressing cola and lemon lime soda
cola and lemon lime soda
Suppose people buy more of good 1 when the price of good 2 falls. These goods are __________. complements normal substitutes inferior
complements
A public good is __________. consumed by everyone simultaneously, as long as they pay for it consumed by everyone simultaneously, even if they do not pay for it consumed by only one person who has to pay for it consumed by only one person who does not have to pay for it
consumed by everyone simultaneously, even if they do not pay for it
An incentive could be a reward but could not be a penalty. could be a penalty but could not be a reward. could be either a reward or a penalty. is the opposite of a tradeoff.
could be either a reward or penalty
When consumption of a good increases, marginal utility will __________. decrease approach total utility increase remain unchanged
decrease
Kumiko is not at her consumer equilibrium. She sees too many movies and buys too few books. As she moves toward her consumer equilibrium, her total utility from movies will __________. decrease, but her total utility from books will increase decrease. So will her total utility from books increase. So will her total utility from books increase, but her total utility from books will decrease
decrease, but her total utility from books will increase
Marginal benefit typically __________. increases as marginal costs increase remains constant as more is consumed increases as more is consumed decreases as more is consumed
decreases as more is consumed
Using the "It's not fair if the result isn't fair" principle of fairness, an income tax designed to transfer wealth from the rich to the poor __________. increases efficiency and does not affect equity decreases efficiency and increases equity increases efficiency and equity decreases efficiency and equity
decreases efficiency and increases equity
A decrease in the expected future price of cars increases the current quantity demanded of cars, that is, there is a movement downward along the demand curve for cars. increases the current demand for cars, that is, there is a rightward shift of the demand curve for cars. decreases the current quantity demanded of cars, that is, there is a movement upward along the demand curve for cars. decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.
decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.
The buyer will pay the entire sales tax levied on a good when . demand is perfectly elastic or supply is perfectly inelastic demand is perfectly elastic or supply is perfectly elastic demand is perfectly inelastic or supply is perfectly elastic demand is perfectly inelastic or supply is perfectly inelastic
demand is perfectly inelastic or supply is perfectly elastic
Demands differ from wants in that __________. demands are unlimited, whereas wants are limited by income demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good wants require a plan to acquire a good but demands require no such plan wants imply a decision about which demands to satisfy, while demands involve no specific plan to acquire the good
demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good
Jane produces only corn and cloth. Taking account of her preferences for corn and cloth _______. makes her production possibility frontier flatter makes her production possibility frontier straighter makes her production possibility frontier steeper does not affect her production possibility frontier
does not affect her production possibility frontier
Adam Smith argued that each person in a competitive market is led to promote the efficient use of society's resources, because each person's intention is to make society better off. efficient use of society's resources, even though it is no person's intention to make society better off. inefficient use of society's resources, even though each person's intention is to make society better off. inefficient use of society's resources, because it is no person's intention to make society better off.
efficient use of society's resources, even though it is no person's intention to make society better off.
The route from Dallas to Mexico City is served by more than one airline. The demand for tickets from American Airlines for that route is probably __________. inelastic but more elastic than the demand for all tickets for that route elastic but less elastic than the demand for all tickets for that route inelastic and less elastic than the demand for all tickets for that route elastic and more elastic than the demand for all tickets for that route
elastic and more elastic than the demand for all tickets for that route
Joshua consumes only apples and bread and is in consumer equilibrium. Joshua reads that eating bread is healthy, so his total utility from each loaf of bread increases. At his new consumer equilibrium Joshua would consume __________. some combination of apples and bread corresponding to a lower ratio of the marginal utility of bread to the marginal utility of apples fewer apples and more bread the same quantity of apples and the same quantity of bread more apples and less bread
fewer apples and more bread
A minimum wage is a government-imposed price ________ that is designed to be ________ the equilibrium wage rate. ceiling; above ceiling; below floor; above floor; below
floor; above
The principle of diminishing marginal utility means that the consumer surplus from the first slice of pizza is . greater than that from the second equal to that from the second not comparable to that from the second less than that from the second
greater than that from the second
A rent ceiling set above the equilibrium rent restricts the quantity demanded but not the quantity supplied. restricts the quantity supplied but not the quantity demanded. restricts both the quantity demanded and the quantity supplied. has no effect.
has no effect
Which of the following is a macroeconomic issue? the cause of a decline in the price of peanut butter how a rise in the price of sugar affects the market for sodas what determines the amount a firm will produce how federal government budget deficits affect interest rates
how federal government budget deficits affect interest rates
As you study for your economics test you are increasing your _________ entrepreneurship ability to create scarcity human capital ownership of wants
human capital
Ceteris paribus means everything affects everything else there is no such thing as free lunch if all other relevant things remain the same scarcity is a fact of life
if all other relevant things remain the same
When an economist talks of scarcity, the economist is referring to the ability of society to employ all of its resources. ability of society to consume all that it produces. inability of society to satisfy all human wants because of limited resources. ability of society to continually make technological breakthroughs and increase production.
inability of society to satisfy all human wants because of limited resources.
A good economic model describes every aspect of the economic world, with no exception. includes all those features of the world that can be described numerically. includes only those features of the world that are needed for the purpose at hand. should not include more than two variables.
includes only those features of the world that are needed for the purpose at hand.
If a good is an inferior good, then purchases of that good will decrease when __________. the price of a substitute rises the demand for it increases population increases income increases
income increases
Marginal utility theory implies that, starting from consumer equilibrium, a rise in income will __________. increase the marginal utility of all goods increase a consumer's total utility increase consumption of all goods None of the above is correct.
increase a consumer's total utility
An increase in the number of fast-food restaurants raises the price of fast-food meals. increases the demand for fast-food meals. increases the supply of fast-food meals. increases the demand for substitutes for fast-food meals.
increases the supply of fast-food meals.
Suppose that you have a choice between video games and movies. If the marginal benefit of a video game, in terms of movies forgone, exceeds the marginal cost, then your resources would be used most efficiently by ________. decreasing video games and increasing movies increasing video games and decreasing movies decreasing video games and movies keeping the status quo, that is, making no change
increasing video games and decreasing movies
If two goods are complements, then their __________. indifference curves are positively sloped straight lines indifference curves are negatively sloped straight lines marginal rate of substitution is infinity indifference curves are L-shaped
indifference curves are L-shaped
Goods whose income elasticities are negative are called __________. normal goods superior goods complements inferior goods
inferior goods
The faster an automobile is driven (speed), the lower the miles per gallon (mpg) for that automobile. Given this information, we say that an automobile's speed and miles per gallon have a(n) __________. maximum relationship direct relationship inverse relationship linear relationship
inverse relationship
When the government chooses to spend the tax dollars that it collects on homeland security, its choice ________. involves a tradeoff of other goods and services such as education for more homeland security illustrates that scarcity does not always exist involves no tradeoff because the defense is necessary primarily affects who gets the goods and services produced
involves a tradeoff of other goods and services such as education for more homeland security
Usharani consumes 35 apples a week and 14 loaves of bread. Apples cost $1 each and bread costs $2 per loaf. Usharani is maximizing his utility and finds that the marginal utility from his 35th apple __________. equals his marginal utility from his 14th loaf of bread is such that his total utility from apples equals his total utility from bread is half his marginal utility from his 14th loaf of bread is twice his marginal utility from his 14th loaf of bread
is half his marginal utility from his 14th loaf of bread
Marginal utility __________. is always negative when total utility is positive and positive when total utility is negative is an implication of the law of demand characterizes things of little use is the additional utility derived from the last unit of a good consumed
is the additional utility derived from the last unit of a good consumed
During the next hour, John can play basketball, watch television, or read a book. The opportunity cost of reading a book . is how much the book cost when it was purchased is the value of playing basketball if John prefers that to watching television equals how much John enjoys the book is the value of playing basketball and the value of watching television
is the value of playing basketball if John prefers that to watching television
Which factor of production earns the most income? Land Capital Labor Entrepreneurship
labor
The marginal rate of substitution is equal to the __________. magnitude of the slope of the indifference curve relative prices of the two goods slope of the demand curve marginal cost of each good
magnitude of the slope of the indifference curve
In terms of work-leisure choices, a person reaches her best attainable combination of work and leisure by __________. working on the backward-bending portion of the labor supply curve working about 40 hours per week making her marginal rate of substitution between work and leisure equal to her wage rate earning the maximum possible salary
making her marginal rate of substitution between work and leisure equal to her wage rate
Overproduction implies that for the last unit produced __________. marginal benefit equals marginal cost marginal benefit exceeds marginal cost marginal cost exceeds marginal benefit the deadweight loss is zero
marginal cost exceeds marginal benefit
Individual economic decisions are coordinated by __________. government through adjustments in income taxes markets through adjustments in sales levels government through adjustments in sales taxes markets through adjustments in prices
markets through adjustments in prices
The slope of a line ________. measures the ratio of the change in the value of the y-axis variable relative to the change in the value of the x-axis variable is always a constant measures the value of the y-axis variable relative to the value of the x-axis variable can never equal zero
measures the ratio of the change in the value of the y-axis variable relative to the change in the value of the x-axis variable
Factors of production include all of the following EXCEPT ________. machines made in past years money entrepreneurship a wheat field that is not irrigated
money
Which is not a factor of production? Land Labor Money Capital
money
The fact that rubies are more expensive than milk reflects the fact that for most consumers __________. the marginal utility from rubies equals that from milk the total utility from rubies exceeds that from milk a quart of rubies is considered to be prettier than a quart of milk more milk is consumed than rubies
more milk is consumed than rubies
If the price of a good changes but everything else influencing suppliers' planned sales remains constant, there is a __________. new supply curve that is to the right of the initial supply curve rotation of the initial supply curve around the initial price movement along the supply curve new supply curve that is to the left of the initial supply curve
movement along the supply curve
Which of the following is NOT a divisible good? electricity gasoline tap water movies
movies
Marginal utility theory is used in the derivation of the . negative slope of supply curves negative slope of demand curves positive slope of demand curves positive slope of supply curves
negative slope of demand curves
"All children should have health insurance" is a ________. normative statement positive statement hypothesis political statement
normative statement
Sam's income for gasoline and coffee currently is $60 per week. If Sam's budget for gasoline and coffee increased from $60.00 to $70.00, Sam would experience __________. only an income effect an increase in the marginal rate of substitution of gasoline for coffee and coffee for gasoline only a substitution effect None of the above is correct.
only an income effect
Some economists predicted that, ceteris paribus, the large 1995 Federal tax increases would cause the economy's performance to deteriorate. Instead, the economy has continued to perform extremely well. These facts mean that . other events may have happened around the same time to make the prediction incorrect
other events may have happened around the same time to make the prediction incorrect
In agricultural markets, once the crop has been harvested, the supply is . elastic but not perfectly elastic perfectly inelastic perfectly elastic unit elastic
perfectly inelastic
Renee consumes pizza and rice. An increase in her income causes her to consume fewer pizzas and more rice. The change in pizzas consumed means that __________. her marginal utility from consuming pizzas had been negative pizza is an inferior good for Renee her marginal utility from consuming pizzas had been zero her total utility from consuming pizzas had been negative
pizza is an inferior good for Renee
The slope of a positive relationship is __________. positive constant as long as the relationship is nonlinear positive to the right of the maximum point and negative to the left undefined
positive
78 percent of children have health insurance" is a/an . normative statement rational choice economic statement positive statement
positive statement
Positive and normative statements differ in that . positive statements can be tested, whereas normative statements cannot positive statements can be graphed, whereas normative statements cannot normative statements depict "what is" and positive statements depict "what ought to be" normative statements can be tested, whereas positive statements cannot
positive statements can be tested, whereas normative statements cannot
If two variables both increase at the same time or decrease at the same time, they are ________. positively related unrelated to each other conversely related negatively related
positively related
Given the information in the table, the relationship between x and y is . x y 0 2 1 5 2 8 3 11 4 14 5 17 positive and linear positive, and the curve becomes steeper as x increases positive, and the curve becomes flatter as x increases negative and linear
postive and linear
Nick consumes two goods—chips and lemonade. The quantity of chips is on the x-axis and the quantity of lemonade is on the y-axis. The slope of the budget line equals the negative of the __________. price of chips/price of lemonade price of chips price of lemonade/price of chips price of lemonade
price of chips/price of lemonade
A shortage causes the __________. demand curve to shift leftward price to rise price to fall supply curve to shift rightward
price to rise
In order to draw an individual's budget line, we must know __________. prices and income prices and preferences income and preferences prices, income, and preferences
prices and income
The demand for Honda Accords is __________. probably inelastic and less elastic than the demand for automobiles probably elastic but less elastic than the demand for automobiles probably elastic and more elastic than the demand for automobiles probably inelastic but more elastic than the demand for automobiles
probably elastic and more elastic than the demand for automobiles
Competitive markets will generally __________. produce too much of a public good produce the efficient amount of a public good in the short run but not in the long run produce the efficient amount of a public good produce too little of a public good
produce too little of a public good
The production possibility frontier is the boundary between those combinations of goods and services that can be _________. consumed and those that cannot be produced produced and those that cannot be produced produced and those that can be consumed consumed domestically and those that can be consumed internationally
produced and those that cannot be produced
The elasticity of supply measures the sensitivity of __________. quantity supplied to quantity demanded quantity supplied to a change in price price to changes in supply supply to changes in costs
quantity supplied to a change in price
The slope of a budget line reflects __________. prices and income consumer preference relative prices consumer income
relative prices
The substitution effect from a rise in the wage rate __________. has the same effect on the quantity of labor supplied as does the income effect results in a decrease in the quantity of labor supplied has no effect on the quantity of labor supplied results in an increase in the quantity of labor supplied
results in an increase in the quantity of labor supplied
When we say demand increases, we mean that there is a __________. movement to the left along a demand curve movement to the right along a demand curve rightward shift of the demand curve leftward shift of the demand curve
rightward shift of the demand curve
A technological improvement lowers the cost of producing coffee. At the same time, consumers' preferences for coffee increase. The equilibrium price of coffee will __________. remain the same fall rise rise, fall, or stay the same, depending on the relative size of the shifts in the demand and supply curves
rise, fall, or stay the same, depending on the relative size of the shifts in the demand and supply curves
When Ramona is in consumer equilibrium, __________. her total utility per dollar spent is equal for all goods she is maximizing her utility, given her income and the prices of goods and services any change in prices would make her worse off her total utilities of all goods are equal
she is maximizing her utility, given her income and the prices of goods and services
After Hurricane Mitch devastated part of Central America in October 1998, we can be reasonably sure that the production possibility frontier for that area temporarily _________. became flatter shifted outward, away from the origin became steeper shifted inward, toward the origin
shifted inward, toward the origin
Tonya, who is rich, and Jerome, who is less rich, both buy orange juice and croissants for lunch at the student cafeteria. Their budget constraints as drawn on a diagram, with orange juice on the vertical axis and croissants on the horizontal, have the same __________. vertical intercepts slopes horizontal intercepts midpoints
slopes
Because of the existence of comparative advantage, the total output of goods is higher when each producer _________. specializes in the production of a particular good makes both intermediate and final goods produces at the midpoint of its PPF produces several different goods
specializes in the production of a particular good
The change in consumption that results from a change in the relative price of goods while staying on the same indifference curve is the __________. substitution effect indifference effect income effect price effect
substitution effect
When the competitive market is using its resources efficiently, the total amount of consumer surplus is maximized. total amount of producer surplus is maximized. sum of the total amount of consumer surplus plus the total amount of producer surplus is maximized. sum of the total amount of consumer surplus plus the total amount of producer surplus equals zero.
sum of the total amount of consumer surplus plus the total amount of producer surplus is maximized.
If a 1 percent decrease in the price of a pound of squash results in a larger percentage decrease in the quantity supplied, __________. supply is inelastic demand is inelastic supply is elastic demand is elastic
supply is elastic
If a 1 percent decrease in the price of a pound of oranges results in a smaller percentage decrease in the quantity supplied, __________. supply is inelastic supply is elastic demand is inelastic demand is elastic
supply is inelastic
The predictions of marginal utility theory __________. support the idea that the supply curve slopes upward support the idea that the demand curve slopes downward contradict the idea that the demand curve slopes downward contradict the idea that the supply curve slopes upward
support the idea that the demand curve slopes downward
The PPF shifts as _________. technology changes tastes and preferences change the money supply grows or shrinks the unemployment rate change
technology changes
Marginal benefit is the benefit . that your activity provides to someone else of an activity that exceeds its cost that arises from a small increase in an activity that arises from the secondary effects of an activity
that arises from a small increase in an activity
Opportunity cost is represented on the production possibilities frontier by _______. attainable and unattainable points technological progress efficient and inefficient points the amount of good Y forgone when more of good X is produced
the amount of good Y forgone when more of good X is produced
Which is the most accurate definition of the study of economics? Economics is the study of . the choices we make because of scarcity ways to reduce wants to eliminate the problem of scarcity affluence in a morally bankrupt world the distribution of surplus goods to those in need
the choices we make because of scarcity
The frontier of the production possibility curve illustrates _________. all goods that can be produced by an economy all possible production of capital goods the combination of goods and services that can be produced efficiently all goods and services that are desired but cannot be produced due to scarce resources
the combination of goods and services that can be produced efficiently
Along an indifference curve __________. the consumer prefers some of the consumption points to others the marginal rate of substitution is constant the marginal rate of substitution is equal to zero the consumer does not prefer one consumption point to another
the consumer does not prefer one consumption point to another
An individual demand curve would NOT shift as a result of a change in __________. the price of a substitute the price of a complement the individual's income the cost of producing the good
the cost of producing the good
A leftward shift of the supply curve of cookies raises the price of a cookie from 10 cents to 20 cents and decreases the quantity demanded from 700,000 to 500,000. You can conclude that __________. the supply of cookies is elastic the supply of cookies is inelastic the demand for cookies is elastic the demand for cookies is inelastic
the demand for cookies is inelastic
In the context of the Production Possibilities Frontier (PPF), increasing opportunity cost is due to ________. ever-increasing taxes firms' needs to earn more and more profits the fact that resources are not equally suited for different types of production . the fact that it is more difficult to use resources efficiently the more society produces
the fact that resources are not equally suited for different types of production .
The ultimate cost of any choice is . what someone else would be willing to pay the highest-valued alternative forgone the after-tax cost the dollars expended
the highest valued alternative forgone
It is efficient to produce an additional shirt if __________. the marginal benefit of producing the shirt is greater than the marginal cost of producing it the marginal benefit of producing the shirt is zero the marginal benefit of producing the shirt is greater than zero total benefits from producing shirts are maximized
the marginal benefit of producing the shirt is greater than the marginal cost of producing it
To maximize total utility, a consumer equates __________. the total utility from each good the marginal utility per dollar spent on each good the marginal utility from each good the total utility per dollar spent on each good
the marginal utility per dollar spent on each good
The above table gives the demand schedule and the supply schedule for housing in Anytown, U.S.A. If a rent ceiling of $600 was imposed in the housing market, then there would be a surplus of apartments. there would be a shortage of apartments. the market would reach equilibrium at the quantity of 60 housing units. the supply of housing would increase
the market would reach equilibrium at the quantity of 60 housing units.
The production possibility frontier represents _________. the maximum amount of resources available at any given time the maximum rate of growth of output possible for an economy the maximum levels of production that can be attained combinations of goods and services that do not fully use available resources
the maximum levels of production that can be attained
A tradeoff is illustrated by ________. a change in the slope of the PPF the negative slope of the PPF a point inside the PPF a point outside the PPF
the negative slope of the PPF
Demand is inelastic if __________. a large change in quantity demanded results in a small change in price the price elasticity of demand is greater than one the price elasticity of demand is less than one the quantity demanded is very responsive to changes in price
the price elasticity of demand is less than one
Assume that the quantity of pizza consumed is dependent on three factors: the price of a pizza, the income of pizza purchasers, and consumers' taste for pizza. When graphing the relationship between the price of a pizza and the quantity of pizza consumed __________. the price of a pizza and the income of pizza consumers are the only variables that are allowed to change consumers' taste for pizza and the income of pizza purchasers are the only variables that are allowed to change the price of pizza and quantity of pizza consumed are the only variables that are allowed to change None of the above is correct.
the price of pizza and quantity of pizza consumed are the only variables that are allowed to change
A relative price is __________. the ratio of one price to another the slope of the demand curve the difference between one price and another the slope of the supply curve
the ratio of one price to another
The slope of a demand curve depends on __________. the units used to measure price but not the units used to measure quantity the units used to measure quantity but not the units used to measure price the units used to measure price and the units used to measure quantity neither the units used to measure price nor the units used to measure quantity
the units used to measure price and the units used to measure quantity
In terms of dollars, the marginal benefit of working five days a week instead of four days a week is the wages received for the fifth day of work. the wages received for 5 days of work. the wages received for 4 days of work. None of the above answers is correct
the wages received for the fifth day of work.
Rent (dollars per month) Quantity of apartments supplied (per month) Quantity of apartments demanded (per month) 200 20 100 300 40 80 400 60 60 500 80 40 600 100 20 The above table gives the demand schedule and the supply schedule for housing in Anytown, U.S.A. If a rent ceiling of $300 is imposed in the housing market, then there would be a surplus of apartments. there would be a shortage of apartments. the market would reach equilibrium at the quantity of 60 housing units. the supply of housing would increase.
there would be a shortage of apartments.
Economics is the study of how people choose ___.
to use limited resources
Of the following, demand is likely to be the least elastic for __________. Toyota automobiles compact disc players Ford automobiles toothpicks
toothpicks
If the marginal benefit of a good exceeds its marginal cost, _________. we should produce less we should produce more we cannot tell if more or less should be produced we've achieved efficient resource use
we should produce more
A good with a horizontal demand curve has a demand __________. with a price elasticity of demand of infinity for which there are no substitutes with an income elasticity of demand of zero with a price elasticity of demand of zero
with a price elasticity of demand of infinity
An increase in subway fares in New York City will boost your expenditures on subway rides if __________. the supply of subway rides is inelastic your demand for subway rides is elastic your demand for subway rides is inelastic the supply of subway rides is elastic
your demand for subway rides is inelastic
