Microecon test 1

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In the weeks before the release of a new version of a product (a new iPad, for example), what will typically happen to the demand curve for the previous version of the product?

shift to the left

Principle 4 of economics

people respond to incentives

Call centers offering technical support for American products have been moved to India to take advantage of lower labor costs. This is an example of: Please choose the correct answer from the following choices, and then select the submit answer button. production efficiency. equity. both production and allocative efficiency. allocative efficiency.

production efficiency

Jackie finds a pair of jeans that she likes but the price tag is missing. She is willing to buy it as long as it's not more than $100. The cashier informs Jackie that the price is $72. Jackie buys the jeans, and therefore achieved a consumer surplus of: $100 because that is what she was willing to pay. $0 because the jeans were not actually discounted. $28, the difference between what she was willing to pay and the price. $72, the price that she actually paid.

$28, the difference between what she was willing to pay and the price.

Which of the following prices would be a binding price floor for strawberries if the current equilibrium price is $3 per pound? 1) $2 2) $3 3) $4 4) none of the above

4)If someone offered you $1,000 for your old car that you had wanted to get sell for some time, and would have taken anything above $600, your producer surplus is: $0 $400 $600 $1,000

$400

Suppose you decide to go to a concert. It is on a day that you would not have worked anyway, but your daily earnings are usually $80. Your friend gave you the concert ticket, which would have cost you $40, and you can resell it for $40. You can expect to spend $40 on food and beverages. What is the opportunity cost of going to the concert?

$80

If a farmer can grow 100 tubs of grapefruit or 250 tubs of oranges per acre of land, what is the opportunity cost of growing one orange? 2.5 oranges 2.5 grapefruits 0.4 of an orange 0.4 of a grapefruit

.4 grapefruit

Suppose that a store sells candy bars for $0.89 for one and $1.50 for two. The marginal cost of the second candy bar is: $0.89. $1.50. $0.75. $0.61.

.61

To gain from trade, a country should: specialize in the commodity for which it has a comparative advantage. always try to get a favorable tariff. always specialize in the commodity for which it has an absolute advantage. trade only with its political allies.

Which of the following is not possible for two countries who trade computers and automobiles with one another? One of the countries has a comparative advantage in the production of both products. One country does not have an absolute advantage in either product but has a comparative advantage in one product. One of the countries has an absolute advantage in the production of both products. One country has an absolute advantage in one product and a comparative advantage in the other product.

inferior good

A good for which an increase in income results in declining demand.

normal good

A good for which an increase in income results in rising demand.

Suppose the increased demand for corn for ethanol production has resulted in record high corn prices. Which of the following is likely to happen to the supply of wheat assuming that corn and wheat are substitutes in production?

A new supply curve to the left of the original supply curve. A decrease in the supply of wheat would occur as more farmers used more land to grow the higher-priced corn. This is represented by the creation of a new supply curve to the left of the original supply curve. Challenge this Question

positive question

A question that can be answered using available information or facts.

normative question

A question whose answer is based on societal beliefs on what should or should not take place.

demand schedule

A table that shows the quantity of a good a consumer purchases at each price

willingness-to-pay

An individual's valuation of a good or service, equal to the most an individual is willing and able to pay.

ceteris paribus

Assumption used in economics (and other disciplines as well), that other relevant factors or variables are held constant.

At what price would total surplus be maximized for a good? At the price of $0 At the equilibrium price At any price above equilibrium At any price below equilibrium

At the equilibrium price

A point to the right of the production possibilities frontier is: improbable. unattainable. inefficient. efficient.

The _____ shows the combination of two goods that are possible for a society to produce at full employment. full employment line maximal productivity curve production possibilities frontier goods and services frontier

total surplus equation

CS+PS

Which of these is NOT an example of market failure? Water is polluted by a paper company located by a river. Air is polluted by a manufacturing firm. Competition leads firms to provide products at the lowest possible price. Consumers must buy water from one local water utility.

Competition leads firms to provide products at the lowest possible price.

_____ is a loss in total surplus that results from an inefficiency in a market not in equilibrium. Please choose the correct answer from the following choices, and then select the submit answer button. Producer surplus Government tax revenue Deadweight loss Consumer surplus

Deadweight loss Deadweight loss is a loss in total surplus that results from an inefficiency in a market not in equilibrium.

12. _____ is how well resources are used and allocated. Efficiency Scarcity Choice Equity

Efficiency

10. _____ is the fairness of various issues and policies. Equity Choice Efficiency Scarcity

Equity

15. Which factor would shift the demand curve for gasoline to the right? an increase in the price of gasoline a decrease in the number of consumers a decrease in the price of alternative forms of energy an increase in national income

an increase in national income

Positive question

answered with facts

What happens to demand for ipads if price of monthly data plans falls?

shift right compliments

priced below equilibrium

shortage

If a decrease in the price of one good causes a decrease in the demand for another, the two goods are called _____ goods.

substitue

Because prices contain useful information for buyers and sellers, the market economy is sometimes called:

the price system

Which is an example of capital in the production process of an amusement park? the mechanics who maintain the equipment the roller coaster the electricity used at the park the ticket-taker

the roller coaster

Principle 2 of economics

tradeoffs

Scarcity is BEST defined as when: the quantity supplied exceeds the quantity demanded. unlimited resources exceed limited wants. unlimited wants exceed limited resources. the quantity demanded exceeds the quantity supplied.

unlimited wants exceed limited resources.

Hyundai's plant in Ulsan, South Korea, is thought to be the largest car factory in the world. It has an annual capacity of 1.86 million cars. The factory is an example of:

capital

Hyundai's plant in Ulsan, South Korea, is thought to be the largest car factory in the world. It has an annual capacity of 1.86 million cars. The factory is an example of: Please choose the correct answer from the following choices, and then select the submit answer button. capital. labor. entrepreneurial ability. land.

capital

If an increase in the price of one good causes a decrease in demand for another, the two goods are called _____ goods.

complementary

On eBay, you find a rare album for sale, and place a maximum bid of $100. At the end of the auction, you win the album at a price of $60. The difference between the $100 that you were willing to pay and the $60 you actually paid is called: consumer profit marginal savings consumer surplus welfare generation

consumer surplus

Total surplus is calculated as: consumer surplus plus producer surplus consumer surplus minus producer surplus consumer surplus times producer surplus consumer surplus divided by producer surplus

consumer surplus plus producer surplus

Microeconomics is concerned with issues such as: which job to take. unemployment. interest rates. inflation.

which job to take

Microeconomics is concerned with issues such as: interest rates. inflation. which job to take. unemployment.

which job to take.

If cream cheese and bagels are complements, then an increase in the price of cream cheese will __________ the demand for bagels. increase not change increase or decrease decrease

decrease

Assuming everything else stays the same, an increase in the price of laptop computers will __________ of laptop computers. decrease the quantity demanded increase the demand increase the quantity demanded decrease the demand

decrease the quantity demanded

All else equal, when the market price rises above equilibrium, consumer surplus:

decreases

What happens to demand for houses if more people believe the market has topped out?

decreases; shifts left expectations

when demand increases

demand curve shifts right price up quanity up

Suppose a PPF diagram has bread on the vertical axis and cookies on the horizontal axis. If an improvement in technology allows cookie production to increase (but not bread), the PPF will: shift parallel outwards extend outward along the vertical axis extend outward along the horizontal axis shift parallel inwards

extend outward along the horizontal axis

scarcity

having unlimited wants with limited resources

supply T

he maximum amount of a product that sellers are willing and able to provide for sale over some time period at various prices, holding all other relevant factors constant (the ceteris paribus condition).

As you move from left to right along a production possibilities frontier that is bowed out from the origin, the opportunity cost of producing the product on the horizontal axis:

increases

market failure reasons

lack of competition asymmetric information external benefit and cost

factors of production

land, labor, capital and ideas

increase in population

move outwards

production

The process of converting resources (factors of production)—land, labor, capital, and entrepreneurial ability—into goods and services.

production possibilities frontier

a model that shows the combinations of two goods a society can produce at full employment

determinants of supply

Nonprice factors that affect supply, including production technology, costs of resources, prices of related commodities, expectations, number of sellers, and taxes and subsidies.

market failure

Occurs when a free market does not lead to a socially desirable outcome.

misallocation of resources

Occurs when a good or service is not consumed by the person who values it the most, and typically results when a price ceiling creates an artificial shortage in the market.

change in demand

Occurs when one or more of the determinants of demand changes, shown as a shift in the entire demand curve.

change in supply

Occurs when one or more of the determinants of supply change, shown as a shift in the entire supply curve.

asymmetric information

Occurs when one party to a transaction has significantly better information than another party

surplus

Occurs when the price is above market equilibrium, and quantity supplied exceeds quantity demanded.

shortage

Occurs when the price is below market equilibrium, and quantity demanded exceeds quantity supplied.

change in quantity demanded

Occurs when the price of the product changes, shown as a movement along an existing demand curve.

change in quantity supplied

Occurs when the price of the product changes, shown as a movement along an existing supply curve.

absolute advantage

One country can produce more of a good than another country.

comparative advantage

One country has a lower opportunity cost of producing a good than another country.

scarcity

Our unlimited wants clash with limited resources, leading to scarcity. Everyone (rich and poor) faces scarcity because, at a minimum, our time on earth is limited. Economics focuses on the allocation of scarce resources to satisfy unlimited wants as fully as possible.

Suppose Congress passes a junk food tax (on manufacturers) to reduce childhood obesity. What will happen to the supply curve for junk food and its equilibrium price? Shifts right; increases Shifts right; decreases Shifts left; increases Shifts left; decreases

Shifts left; increases

The quantity supplied of spoons has decreased due to a change in price. How would this change in quantity supplied be represented on the supply curve?

a movement from one point on the curve to a lower point on the curve

The quantity supplied of spoons has increased due to a change in price. How would this change in quantity supplied be represented on the supply curve?

a movement from one point on the line to a higher point on the line

Which question is NOT an example involving marginal analysis? Should K-Mart rebrand all its stores to using the Sears name? Should a university offer another section of a class? Should Boeing hire another assembly-line worker? Should a restaurant stay open another hour?

Should K-Mart rebrand all its stores to using the Sears name?

production possibilities frontier (PPF)

Shows the combinations of two goods that are possible for a society to produce at full employment. Points on or inside the PPF are attainable, and those outside of the frontier are unattainable.

equilibrium price

The price at which the quantity demanded is just equal to quantity supplied.

If you paid $18 for an "unlimited play" pass at Boomers Fun Center, what is the marginal cost of the 3rd round of mini-golf? $18 $6 $3 $0

If you were not studying economics, you could be doing one of the following: sleeping in (which you value at $5), playing cards with your friends (which you value at $10), or working (you would have earned an extra $8). The opportunity cost of studying economics is therefore: $10. $8. $23. $5.

$10

horizontal summation

The process of adding the number of units of the product purchased or supplied at each price to determine market demand or supply.

production efficiency

Goods and services are produced at their lowest resource (opportunity) cost.

substitute goods

Goods consumers will substitute for one another. When the price of one good rises, the demand for the other good increases, and vice versa.

complementary goods

Goods that are typically consumed together. When the price of a complementary good rises, the demand for the other good declines, and vice versa.

law of demand

Holding all other relevant factors constant, as price increases, quantity demanded falls, and as price decreases, quantity demanded rises.

law of supply

Holding all other relevant factors constant, as price increases, quantity supplied rises and as price declines, quantity supplied falls.

efficiency

How well resources are used and allocated. Do people get the goods and services they want at the lowest possible resource cost? This is the chief focus of efficiency.

Which of the following questions would least likely represent marginal analysis? I'm planning to spend 120 minutes fishing, but maybe I should spend more? I'm planning to spend $12 on apples, but maybe I should spend $1 more? I'm planning to spend $6 on bananas, but maybe I should buy oranges instead? I'm planning to hire five cooks, but maybe I should hire one more?

I'm planning to spend $6 on bananas, but maybe I should buy oranges instead?

capital

Includes manufactured products such as tractors, welding equipment, and computers that are used to produce other goods and services. The payment for capital is interest.

Every economy must decide:

What to produce. How to produce it. Who will get the goods produced.

Basic Economic Questions

What to produce? How to produce? For whom to produce?

Consumer surplus is represented by the area: Please choose the correct answer from the following choices, and then select the submit answer button. below the market price and above the demand curve. above the market price and below the demand curve. below the market price and below the demand curve. above the market price and above the demand curve.

above the market price and below the demand curve. Consumer surplus is represented by the area above the market price and below the demand curve. Challenge this Questio

Producer surplus is represented by the area: above the demand curve and below the price below the demand curve and above the price above the supply curve and below the price below the supply curve and above the price

above the supply curve and below the price

_____ advantage exists when one country can produce more of a good than another country. Unfair Absolute Comparative Home country

absolute

In economics, capital refers to: actual manufactured buildings and equipment used in the production process. anything that adds to human capital. the process of raising money in the stock market. funds used by businesses to acquire goods and services.

actual manufactured buildings and equipment used in the production process

Specialization Leads to Gains for All Involved Specializing in tasks in which one is comparatively better at doing than another allows individuals to achieve productivity gains as long as the work is shared in a mutually beneficial manner.

Which curve slopes up and which slopes down? Two tricks to aid in memory: S"up"ply contains the word "up" for upward-sloping. Only the fingers on your right hand can make a "d" for demand. Hold that hand up in front of you!

most goods are normal goods

consumer and producer surplus

1/2*b*h

Suppose the price of a good in a market with three customers is $200. The first customer is willing to pay $200. The second customer is willing to pay $205. The total consumer surplus in the market is $15. How much is the third customer willing to pay?

210

demand curve

A graphical illustration of the law of demand, which shows the relationship between the price of a good and the quantity demanded.

The United States can produce more microcomputer chips and more oil than Mexico. If the United States can produce microcomputer chips at a lower opportunity cost than Mexico, and Mexico can produce oil at a lower opportunity cost than the United States, what should the countries do in terms of specialization and trade?

The United States should produce microcomputer chips and trade them to Mexico for oil. Trade creates mutual benefits and lower opportunity costs when comparative advantage exists.

In 2010, frost badly damaged the tomato crop in Florida. The crop loss caused tomato prices to increase. According to the law of demand, what will happen to the quantity demanded for tomatoes based on this price change?

The quantity demanded will decrease.

deadweight loss

The reduction in total surplus that results from the inefficiency of a market not in equilibrium.

Assume the market for DVD movies is initially at equilibrium. A decrease in the price of streamed movies, a substitute for DVD movies, will __________ the equilibrium price and ___________ the equilibrium quantity of DVD movies. increase; increase increase; decrease decrease; increase decrease; decrease

decrease; decrease

The idea that free trade allows countries to consume more than without trade refers to: autarky gains from trade economies of scale allocative efficiency

gains from trade

economics

how people and firms make decisions given limintations

Principle 8 economics

institutions and creativity explain the wealth of nations

The law of supply states that as prices _____, the quantity _____. rise; demanded falls fall; demanded rises fall; supplied rises rise; supplied rises

not a

price floor A minimum price established by government for a product or service. When the price floor is set above equilibrium, a surplus results.

price floor above equilibrium causes a surplus

increase in demand and large increase in supply

quantity: increase price: decreases

land

Includes natural resources such as mineral deposits, oil, natural gas, water, and land in the usual sense of the word. The payment for land used as a resource is rent.

Which scenario can occur when specialization in tasks is coupled with trade? It can lead to gains for all parties. It leads to gains for one party and losses for the other parties. It leads to losses for all parties. It works only with government intervention.

It can lead to gains for all parties.

A leather company produces shoes and belts. What will the company do if it expects the price of shoes to rise in the near future? It will do nothing and continually evaluate the situation. It will enter into a new product line, such as jackets. It will move resources from shoe to belt production, thereby decreasing the supply of shoes. It will move resources from belt production to shoe production, thereby decreasing the supply of belts.

It will move resources from belt production to shoe production, thereby decreasing the supply of belts.

resources

Productive resources include land (land and natural resources), labor (mental and physical talents of people), capital (manufactured products used to produce other products), and entrepreneurial ability (the combining of the other factors to produce products and assume the risk of the business).

microeconomics

The study of the decision making by individuals, businesses, and industries.

If we start at a on the PPF, and there is an increase in technology and resources, what is most likely to happen to the PPF? The PPF shifts to the right The PPF shifts to the left The PPF does not change at all The PPF completely disappears

The PPF shifts to the right

In 2012 a company sold 35,000 DVD players at $30 each. In 2013 the same company sold 40,000 DVD players at $25 each. The information suggests that: The supply of DVD players shifted right from 2012 to 2013 The demand of DVD players shifted right from 2012 to 2013 Wages in the DVD industry fell from 2012 to 2013 From 2012 to 2013 the demand curve for DVD players was upward sloping because of improved technology

The supply of DVD players shifted right from 2012 to 2013

Which statement is NOT correct about markets? They require a physical location for transactions to take place. They can exist for single goods as well as for multiple products. They use prices to communicate between buyers and sellers. They enable buyers and sellers to conduct transactions with one another.

They require a physical location for transactions to take place.

Normative question

based on opinions

Principle 7 of economics

economic growth, low inflation and unemployment do not always coincide

Alan is a lawyer with a law degree from a prestigious university in New England. The degree is an example of:

human capital

Principle 3 of economics

specialization leads to gains for all

have no effect. There is no effect when a price floor is set below the equilibrium price.

Markets work most efficiently when:

there are many buyers and sellers. Competitive markets, with many buyers and sellers, are more likely to be efficient than noncompetitive markets

A point on a nation's production possibilities frontier indicates: an undesirable combination of goods and services. combinations of output that are unattainable, given the current stock of resources and technology. levels of production that will cause both unemployment and inflation. that resources are fully utilized in producing the given combination of goods and services.

The gap between the demand curve and the market price is called: profit. deadweight loss. consumer surplus. producer surplus.

consumer surplus.

For any given product, _____ is determined by what the market will bear. price quality quantity None of the answers is correct.

price

Suppose that the U.S. government tries to curtail the Halloween tradition of "tepeeing" by placing a restriction on the sales of toilet paper during the month of October. Such a quantity restriction would cause the price of toilet paper to _____ and quantity to _____. rise; fall rise; rise fall; fall fall; rise

rise; fall

Chapter 1

Determinants of Demand: How Demand Curves Shift ↑ Tastes and preferences: Demand shifts right. ↑ Income: Demand for normal goods shifts right, while demand for inferior goods shifts left. ↑ Price of substitutes: Demand shifts right. ↑ Price of complements: Demand shifts left. ↑ Number of buyers: Demand shifts right. ↑ Price expectations: Demand shifts right. When investors expect stock prices to increase, demand for stock increases.

Determinants of Supply: How Supply Curves Shift ↑ Production technology: Supply shifts right. ↑ Cost of resources: Supply shifts left. ↑ Price of related commodities: Supply shifts left. ↑ Price expectations: Supply shifts left. ↑ Number of sellers: Supply shifts right. ↑ Taxes: Supply shifts left. ↑ Subsidies: Supply shifts right.

Production efficiency: Goods and services are produced at their lowest possible resource cost. Allocative efficiency: Goods are produced according to what society desires. 2.2 Factors of Production (Inputs)

opportunity cost

whatever must be given up to obtain some item. The next best.

How does equilibrium price and quantity for sushi change when the cost of fish used in sushi increases? Equilibrium price rises and equilibrium quantity falls Equilibrium price rises and equilibrium quantity rises Equilibrium price falls and equilibrium quantity falls Equilibrium price falls and equilibrium quantity rises

Equilibrium price rises and equilibrium quantity falls

Implementing a price ceiling can cause: poverty. a surplus. scarcity. a shortage.

a shortage

Implementing a price floor can cause: a surplus. poverty. scarcity. a shortage.

a surplus.

6. Which is considered a land resource? a copier mineral deposits a sewing machine an apprentice

Economists and policy makers often deal with the tradeoff between efficiency and:

equity. Economists and policy makers often deal with the tradeoff between efficiency and equity.

four stakeholders in international trrade

import industry labor export industry labor import consumer export consumer

price $200 willing to pay $120 what is the consumer surplus?

none since it is abovve what we are willing to pay

If an increase in income causes an increase in the demand for a good, then the good is called a(n) _____ good.

normal

Employers give stock options to full-time employees who have been on the job more than three years. This is an example of: opportunity costs. thinking on the margin. people following incentives. irrational behavior.

people following incentives

when supply increases

price goes down and quanity goes down

How large is deadweight loss in equilibrium? the dollar value of producer surplus minus consumer surplus the dollar value of producer surplus plus consumer surplus the dollar value of consumer surplus minus producer surplus zero

zero

Suppose the price of a tablet is $200 and there are three buyers in the market. Dana is willing to pay $190, Brit is willing to pay $210, and Jonah is willing to pay $300. How much consumer surplus is there in this market? Please choose the correct answer from the following choices, and then select the submit answer button. none $100 $110 $120

$110 Consumer Surplus = Willingness to Pay − Price. Consumers will not buy the product if price is greater than their willingness to pay. In this case, only Brit and Jonah buy the product and receive consumer surplus.

Suppose the price of a good is $179. The first customer is willing to pay $200; the second customer is willing to pay $210; and the third customer is willing to pay $300. How much consumer surplus is there in this market? Please choose the correct answer from the following choices, and then select the submit answer button. $200 $179 $379 $173

$173 Consumer Surplus = Willingness to Pay − Price. Consumers will not buy the product if price is greater than their willingness to pay. In this case, all three consumers buy the product and have consumer surplus.

If Debbie goes to the store with $60 and is willing to spend no more than half of the money on a shirt, how much consumer surplus does she get if she buys a shirt for $25? $0 $5 $25 $35

Desperate to go the big game, you bring $200 in cash hoping to find a ticket scalper with an extra ticket. You lucked out and found a ticket for sale for $150. Your consumer surplus is: $0 $50 $150 $200

$50

Suppose the market for t-shirts has three sellers: Martin, whose willingness to sell is $6, Adam, whose willingness to sell is $10, and Clara, whose willingness to sell if $12. If t-shirts sell for $11 each, then producer surplus in this market is: $6 $14 $0 $8

)Suppose that the equilibrium price of greeting cards declined at the same time the equilibrium quantity of greeting cards increased. Which one of the following would most likely be responsible? A decrease in the price of paper used to make greeting cards A decrease in the demand for greeting cards A decrease in supply and an increase in demand for greeting cards An effective advertising campaign by the greeting card industry

A decrease in the price of paper used to make greeting cards

supply curve

A graphical illustration of the law of supply, which shows the relationship between the price of a good and the quantity supplied.

price ceiling

A maximum price established by government for a product or service. When the price ceiling is set below equilibrium, a shortage results. a price ceiling below creates shortage

Suppose the equilibrium price in a market is $10. The government sets a price ceiling of $7. What is most likely to occur? Please choose the correct answer from the following choices, and then select the submit answer button. The market will be at its most efficient point. A shortage is most likely to occur. The market will continue to operate at equilibrium. A surplus is most likely to occur.

A shortage is most likely to occur. A binding price ceiling is set below the equilibrium where quantity demanded is greater than quantity supplied.

Both the former Soviet Union and China (until quite recently) were highly centrally planned, and virtually all resources were government-owned. Although Russia and China have moved toward market economies, a large portion of each country's resources is still owned by the state. Which of these economies must answer the three basic economic questions? Please choose the correct answer from the following choices, and then select the submit answer button. Russia, both in the past and as it is now the Soviet Union and China as they were in the past All of the economies must answer the three basic questions. China, both in the past and as it is now

All of the economies must answer the three basic questions. All economies have to answer the three basic economic questions. How that is done depends on who owns the factors of production (land, labor, capital, and entrepreneurship) and how decisions are made to coordinate production and distribution.

In economics, capital refers to: funds used by businesses to acquire goods and services. actual manufactured buildings and equipment used in the production process. the process of raising money in the stock market. anything that adds to human capital.

Which of these is NOT an economic factor of production? labor money entrepreneurial ability land

decrease in the price of a game of bowling shifts the A) demand curve for bowling balls leftward. B) demand curve for bowling balls rightward. C) supply curve of bowling balls leftward. D) supply curve of bowling balls rightward

B rightward

If the government removes a binding price ceiling from a market, then the price received by sellers will A. decrease, and the quantity sold in the market will decrease. B. increase, and the quantity sold in the market will increase. C. decrease, and the quantity sold in the market will increase. D. increase, and the quantity sold in the market will decrease.

B. increase, and the quantity sold in the market will increase

Which of these is NOT an example of market failure? Water is polluted by a paper company located by a river. Competition leads firms to provide products at the lowest possible price. Air is polluted by a manufacturing firm. Consumers must buy water from one local water utility

Competition leads firms to provide products at the lowest possible price.

What happens to consumer surplus and producer surplus if the equilibrium price of a product is $500 but the product currently sells for $800? Please choose the correct answer from the following choices, and then select the submit answer button. Consumer surplus increases and producer surplus stays constant. Both consumer surplus and producer surplus stay constant. Consumer surplus decreases, but producer surplus could either increases or decreases. Consumer surplus and producer surplus both increase.

Consumer surplus decreases, but producer surplus could either increases or decreases. Consumer surplus decreases and producer surplus will either increase or decrease.

Suppose you bought your textbook for $75 from someone who dropped the course early in the semester. You would have been willing to pay up to $100 (the price at the bookstore), while the seller's minimum price was $30 (the bookstore's buyback price). Given this information: Consumer surplus is $175; Producer surplus is $30 Consumer surplus is $100; Producer surplus is $30 Consumer surplus is $75; Producer surplus is $45 Consumer surplus is $25; Producer surplus is $45

Consumer surplus is $25; Producer surplus is $

Which of the following would cause a decrease in consumer surplus? Please choose the correct answer from the following choices, and then select the submit answer button. a decrease in price due to a technological advancement a decrease in price due to lower input prices an increase in prices due to a sales tax an increase in supply

Correct: an increase in prices due to a sales tax

In the late 1800s, Cecil Rhodes took the money he made from renting water pumps to miners and used it to buy up the claims of small mining operations. In time, and with the help of funding from the Rothschild family, he formed De Beers, which would become the largest diamond mining company in the world. Which of the following best describes the role Cecil Rhodes played for De Beers? Please choose the correct answer from the following choices, and then select the submit answer button. capital land entrepreneurial ability labor

Correct: entrepreneurial ability

Which is NOT a basic economic question that societies must answer? How are the goods and services to be produced? For whom are the goods and services being produced? What goods and services are to be produced? Why are these goods and services being produced?

entrepreneurs

Entrepreneurs combine land, labor, and capital to produce goods and services. They absorb the risk of being in business, including the risk of bankruptcy and other liabilities associated with doing business. Entrepreneurs receive profits for their effort.

labor

Includes the mental and physical talents of individuals who produce products and services. The payment to labor is wages.

memory chips have fallen in price. what happens to the supply of portable harddrives?

Increases to the right

markets

Institutions that bring buyers and sellers together, so they can interact and transact with each other.

equilibrium

Market forces are in balance when the quantities demanded by consumers just equal the quantities supplied by producers.

Miguel sells double-scoop ice cream cones at the market equilibrium price of $4. Assume the government intervenes and sets the price at $6. None of Miguel's customers are willing to buy ice cream at the higher price. What has happened to Miguel's producer surplus? Please choose the correct answer from the following choices, and then select the submit answer button. Miguel's producer surplus is unchanged. Miguel's producer surplus increases. Miguel's producer surplus decreases to zero. Miguel's producer surplus decreases, but not to zero.

Miguel's producer surplus decreases to zero. Miguel's producer surplus falls to zero because he is not able to sell ice cream at the higher price.

determinants of demand

Nonprice factors that affect demand, including tastes and preferences, income, prices of related goods, number of buyers, and expectations.

If the wages of auto workers increase, what will happen to the equilibrium price and quantity of automobiles? Price will increase; Quantity will increase Price will increase; Quantity will decrease Price will decrease; Quantity will increase Price will decrease; Quantity will decrease

Price will increase; Quantity will decrease

Jerry and Anat each own a bicycle tire shop and sell bicycle tires at the market equilibrium price of $42. Assume the government intervenes and sets the price of bicycle tires at $37. Neither is able to earn a profit at the lower price, and both go out of business. If there are no other sellers in this market, what effect does this have on producer surplus? Please choose the correct answer from the following choices, and then select the submit answer button. Producer surplus decreases, but not to zero. There is no effect on producer surplus. Producer surplus increases. Producer surplus decreases to zero.

Producer surplus decreases to zero. Producers who exit the market no longer have any producer surplus.

If Canada has an absolute advantage in maple syrup production and hockey puck production over Saudi Arabia, then which of the following is true? Please choose the correct answer from the following choices, and then select the submit answer button. Canada's production possibilities frontier for maple syrup and hockey pucks will be smaller than Saudi Arabia's. Both countries have the same size production possibilities frontier for maple syrup and hockey pucks. Saudi Arabia's production possibilities frontier for maple syrup and hockey pucks will be smaller than Canada's. The two production possibility frontiers cannot be compared, since both countries are producing at different levels.

Saudi Arabia's production possibilities frontier for maple syrup and hockey pucks will be smaller than Canada's. Absolute advantage is illustrated by one country having a larger production possibilities frontier than the other.

Airline ticket prices typically increase during the holidays. Madeline paid $800 for a ticket to San Francisco over the holiday break. Four months ago, she paid $450 to fly to San Francisco. Who benefits from this price increase? Please choose the correct answer from the following choices, and then select the submit answer button. Consumers who no longer purchase the airline ticket benefit. Both Madeline and the airline benefit. The airlines still able to sell tickets during the holiday season benefit. Madeline benefits because her consumer surplus increased when she paid a higher price for the ticket.

The airlines still able to sell tickets during the holiday season benefit. Producer surplus rises for suppliers who are able to sell the product at a higher price.

opportunity cost

The cost paid for one product in terms of the output (or consumption) of another product that must be forgone.

2)Consider the market for Voss spring water. If the price of Fiji water (a substitute for Voss water) increases, which one of the following might be an outcome? The demand for Fiji water will decrease (shift left) The demand for Voss water will increase (shift right) The equilibrium quantity of Voss water will fall The price of Voss water will fall

The demand for Voss water will increase (shift right)

producer surplus

The difference between the market price and the price at which firms are willing to supply the product. It is equal to the area below market price and above the supply curve.

consumer surplus

The difference between what consumers (as individuals or the market) would be willing to pay and the market price. It is equal to the area above market price and below the demand curve.

incentives

The factors that motivate individuals and firms to make decisions in their best interest.

equity

The fairness of various issues and policies.

demand

The maximum amount of a product that buyers are willing and able to purchase over some time period at various prices, holding all other relevant factors constant (the ceteris paribus condition).

allocative efficiency

The mix of goods and services produced is just what the society desires.

equilibrium quantity

The output that results when quantity demanded is just equal to quantity supplied.

The country of Lauronia is currently at full production of sweatshirts and applesauce. What would it look like on the production possibilities frontier if production of one of those products dropped while the production level of the other product stayed the same?

The point would move from the line to the inside of the curve. A decrease in total production is represented by a movement inward from the curve.

Suppose that the local grocery store raises the price of peanut butter. Which of the following would be likely to occur as a result?

The quantity demanded of peanut butter will decrease and the demand for jelly will shift to the left. An increase in price results in a decrease in the quantity demanded. The demand for a complementary good will decrease.

Over the past few decades, the cost of producing computers has decreased. This has caused computer prices to fall as well. According to the law of demand, what will happen in the market for computers based on this price change?

The quantity demanded will increase.

According to the law of supply, if the price of cars increases, what will happen to the quantity of cars supplied?

The quantity supplied will increase.

According to the law of supply, if the price of cars increases, what will happen to the quantity of cars supplied? Please choose the correct answer from the following choices, and then select the submit answer button. The quantity supplied will increase. The quantity supplied will decrease. The quantity supplied will be unaffected by this event. The quantity supplied will either rise or fall depending on other factors.

The quantity supplied will increase. According to the law of supply, as the price increases, quantity supplied will increase, holding all other relevant factors constant.

economics

The study of how individuals, firms, and society make decisions to allocate limited resources to many competing wants.

macroeconomics

The study of the broader issues in the economy such as inflation, unemployment, and national output of goods and services.

The supply of DVD players shifted right from 2012 to 2013

opportunity cost

The value of the next best alternative; what you give up to do something or purchase something.

MARKET EQUILIBRIUM

Together, supply and demand determine market equilibrium, which occurs when the quantity supplied exactly equals quantity demanded. The equilibrium price is also called the market-clearing price. When quantity demanded exceeds quantity supplied, a shortage occurs and prices are bid up toward equilibrium. When quantity supplied exceeds quantity demanded, a surplus occurs and prices are pushed down toward equilibrium. When supply and demand change, equilibrium price and output change. When only one curve shifts, the resulting changes in equilibrium price and quantity can be predicted. When both curves shift, we can predict the change in equilibrium price in some cases or the change in equilibrium quantity in others, but never both. We have to determine the relative magnitudes of the shifts before we can predict both equilibrium price and quantity.

Suppose that the United States can produce five times more oil and 10 times as many microcomputer chips as Mexico. Would the United States trade with Mexico? Please choose the correct answer from the following choices, and then select the submit answer button. Yes, because Mexico would have the comparative advantage in producing oil. Yes, because Mexico would have the comparative advantage in producing oil and microcomputer chips. No, the United States would just produce both products itself. Yes, because Mexico would have the absolute advantage in producing oi

Yes, because Mexico would have the comparative advantage in producing oil. The United States would have the absolute advantage in both products, but (compared with Mexico) its advantage in producing microcomputer chips is greater than its advantage in producing oil. Therefore, the United States would have the comparative advantage in producing microcomputer chips and Mexico would have the comparative advantage in producing oil.

If an economy is producing at a point inside its production possibilities frontier: it is possible to produce more of one good without giving up some of the other good. it is producing efficiently. full employment is achieved. it is producing beyond its production possibilities

In an eight-hour day, Isabel can produce 15 pounds of taffy or 3 pounds of chocolate chip cookies. In an eight-hour day, Ramona can produce 6 pounds of taffy or 6 pounds of chocolate chip cookies. The opportunity cost of producing 1 pound of chocolate chip cookies is: five pounds of taffy for Isabel and one pound of taffy for Ramona. one-fifth of a pound of taffy for Isabel and one pound of taffy for Ramona. one-fifth of an hour for Isabel and one hour for Ramona. one hour for Isabel and one hour for Ramona.

Which of the following is a nonexclusive good? Please choose the correct answer from the following choices, and then select the submit answer button. a rental car a fully cooked flank steak your neighbor's lawnmower a city park that is open to the public

a city park that is open to the public Once a nonexclusive good has been provided for one person, others cannot be excluded from enjoying the good.

Which of the following would cause a country's production possibilities frontier (PPF) to shift inward? Please choose the correct answer from the following choices, and then select the submit answer button. a civil war higher literacy increased population technological change

a civil war A civil war could cause the PPF of a country to shift inward.

Which of the following would cause a decrease in producer surplus? Please choose the correct answer from the following choices, and then select the submit answer button. a decrease in prices that sellers receive because of a sales tax an increase in price due to an increase in the number of buyers an increase in demand an increase in price due to rising consumer income

a decrease in prices that sellers receive because of a sales tax A lower price generally causes producer surplus to fall.

Which event will NOT cause the supply curve for kayaks to shift to the left? an increase in the costs of materials to build a kayak an increase in the taxes on kayaks a decrease in the price of a kayak a decrease in the number of sellers of kayaks

a decrease in the price of a kayak

Which of the following would NOT cause the demand for iPads to shift left? a decrease in the price of other brands of tablets an expectation that the price of iPads will fall in two months a decrease in the price of wireless data plans for the iPad a decrease in average incomes due to a recession

a decrease in the price of wireless data plans for the iPad

In the short run, an expected future price reduction will cause a seller to change the amount they supply in the present. How would this be illustrated on a supply and demand graph?

a new supply curve to the right of the original curve

Beth listens to National Public Radio (NPR) without paying. NPR is an example of: Please choose the correct answer from the following choices, and then select the submit answer button. an external cost. asymmetric information. a public good. a private good.

a public good. NPR is a public good that is nonexcludable and nonrival.

In 2011, China raised the minimum price for white wheat by 7 yuan to boost wheat production. What was the likely result of this action? Assume the market was in equilibrium before the price increase.

a surplus of wheat The higher price will increase production, but also decrease the quantities consumers choose to buy. Challenge this Questi

All markets have the same basic component, which is:

a transaction.

All markets have the same basic component, which is: Please choose the correct answer from the following choices, and then select the submit answer button. that they are legal. a single product. a physical location. a transaction.

a transaction. Even though all markets have the same basic component, a transaction, they can differ in a number of ways. Some markets are quite limited because of their geographic location, or because they offer only a few different products for sale. Ticket scalping, though illegal in many states, represents market activity since it leads to the exchange of money for tickets. The Internet, without a physical location, permits firms and individuals to sell a large number of products.

To find the market supply of a good or service, economists: Please choose the correct answer from the following choices, and then select the submit answer button. perform the process called vertical summation of the individual supply curves. add together the prices each producer would charge for each quantity. add together the quantities each producer would produce at each price. subtract the quantities each producer would produce at each price from the total demand at those prices.

add together the quantities each producer would produce at each price.

Which policy is MOST likely to contribute to improved standards of living over time? addressing teacher shortages by closing schools and busing students to other schools adding after-school art and music programs to promote creativity reducing the years that drug patents are valid to speed up production of generic versions allowing individuals the freedom to circumvent laws due to personal objections to them

adding after-school art and music programs to promote creativity

Marginal analysis would put an emphasis on: total tangible costs and benefits. additional costs and benefits. total monetary costs and benefits. total opportunity costs and benefits.

additional costs and benefits.

Kevin just purchased two concert tickets at a fundraiser auction. He was able to get the tickets because he was the highest bidder. This is an example of:

allocative efficiency

The supply curve for potato chips in the potato chip market is:

an upward-sloping line. According to the law of supply, a supply curve for potato chips would be represented by an upward-sloping line.

The law of demand states that: as prices rise, quantity supplied rises as prices rise, quantity supplied falls as prices rise, quantity demanded rises as prices rise, quantity demanded falls

as prices rise, quantity supplied falls

Mr. Smith, who knows the proposed site of a major new highway from reading the newspaper, buys a ranch from Mr. Jones, who never reads the newspapers. This is an example of: asymmetric information. opportunity cost. adverse selection. moral hazard.

asymmetric information.

Collectors and antiques dealers who shop yard sales and flea markets might have a better idea of the values of the items being sold than the sellers do. This is an example of: Please choose the correct answer from the following choices, and then select the submit answer button. asymmetric information. an external cost. an external benefit. producer surplus.

asymmetric information. Asymmetric information occurs when one party to a transaction has more information than the other party.

Suppose Mike has three hours of time to spend so he ranks the following activities in order of priority: (1) see a movie, (2) attend a ball game, (3) study economics. Assume that each activity takes three hours. What is Mike's opportunity cost of seeing the movie? either attending a ball game or studying economics attending a ball game studying economics attending a ball game and studying economics

attending a ball game

What are the three basic economic questions each society must answer? how much goes to government; how much goes to consumers; how much is exported what to produce; how to produce; for whom to produce what to produce; how to much to produce, how to consume how much to produce; what quality to produce; what price to sell at

Producer surplus is represented by the area: Please choose the correct answer from the following choices, and then select the submit answer button. above the market price and below the supply curve. below the market price and below the supply curve. above the market price and above the supply curve. below the market price and above the supply curve.

below the market price and above the supply curve. Producer surplus is represented by the area below the equilibrium price and above the supply curve.

A _____ is set above the equilibrium price for a good. Please choose the correct answer from the following choices, and then select the submit answer button. fair price binding price ceiling nonbinding price floor binding price floor

binding price floor A binding price floor is a minimum price for a good that is set above the equilibrium price.

Suppose the equilibrium price in a market is $10. The government sets a minimum price of $12. This price of $12 is an example of a(n):

binding price floor. A price floor is a minimum price for a good and is set above the equilibrium price.

Butter is a substitute for margarine. If the price of margarine drops, we would expect to see: both the price of butter and the quantity of butter rise. both the price of butter and quantity of butter fall. the price of butter rise and the quantity of butter fall. the price of butter fall and the quantity of butter rise.

both the price of butter and quantity of butter fall.

In ________ economies, private individuals and firms own most of the resources. capitalist planned communist socialist

capitalist In capitalist or market economies, private individuals and firms own most of the resources.

To study the effect of price on Frank's demand for premium movie channels economists hold his monthly income constant. This is an example of a(n) _______ assumption. Please choose the correct answer from the following choices, and then select the submit answer button. equity marginal ceteris paribus efficiency

ceteris paribus

The quantity demanded of mattresses increased due to a decrease in price. Because of this the demand for bed frames increased. In this example, mattresses and bed frames are _____ goods.

comparative

The theory that suggested that countries would mutually benefit from trade by specializing in export goods they could produce at lower opportunity costs than another country is called: labor specialization theory. comparative advantage. marginal utility. absolute advantage.

comparative advantage

__________ occurs when one country has a lower opportunity cost of producing a good than another country.

comparative advantage

If an increase in the price of one good causes a decrease in demand for another, the two goods are called _____ goods. Please choose the correct answer from the following choices, and then select the submit answer button. complementary normal inferior substitute

complementary Complementary goods are goods that are typically consumed together.

An increase in the price of one good can cause a decrease in the demand for another good if the goods are: substitutes complements unrelated to each other both inferior

complements

The difference between what a consumer is willing to pay and what he or she actually pays for a good or service is known as: Please choose the correct answer from the following choices, and then select the submit answer button. producer surplus. external benefit. consumer surplus. external cost.

consumer surplus. Consumer surplus is the difference between what a consumer is willing to pay and what he or she actually pays for a good or service.

Market Segmentation

creating separate markets for a good for different groups of consumers

When a large factory closed in the town of Greenville, income fell for many residents. As a result, demand for normal goods would _____ and demand for inferior goods would _____. decrease; decrease increase; increase decrease; increase increase; decrease

decrease; increase

Capital includes all of these EXCEPT: drilling equipment at a tool-and-die company. copy machines in an insurance company. tractor loaders of a construction firm. dollar bills in a bank vault.

dollar bills in bank vault

A production possibilities frontier that illustrates increasing opportunity cost would be: Please choose the correct answer from the following choices, and then select the submit answer button. downward sloping and convex. upward sloping and convex. upward sloping and concave. downward sloping and concave.

downward sloping and concave.

The "all-you-can-eat" buffet at Kobe Sushi Palace costs $15 at the entrance. In order to maximize your benefit at the buffet, you should: eat just enough to satisfy your hunger eat until the average cost per plate equals your marginal cost eat until your marginal benefit of the next plate is $15 eat until your marginal benefit of the next plate is zero

eat until your marginal benefit of the next plate is zero

The two basic determinants of economic growth are _____ and _____. expanding resources; improving technologies government spending; labor productivity income taxes; human capital tariffs; trading with weaker countries

expanding resources; improving technologies

A decrease in demand causes the equilibrium price to _____ and the equilibrium quantity to _____. fall; fall fall; rise rise; rise rise; fall

fall;fall

Government intervention in the market is helpful when: firms engage in production activities that pollute the air and water. consumers and firms have good information. consumers are free to buy from a number of different firms. firms face increasing competition from new entrants into the market.

firms engage in production activities that pollute the air and water.

If a rise in the price of gasoline decreases the demand for large cars, gasoline and large cars are complements in consumption gasoline and large cars are substitutes in consumption gasoline is an inferior good large cars are an inferior good

gasoline and large cars are complements in consumption

Alan is a lawyer with a law degree from a prestigious university in New England. The degree is an example of: Please choose the correct answer from the following choices, and then select the submit answer button. entrepreneurial ability. land. human capital. capital.

human capital. Human capital is improvements to labor through training, experience, and education.

Students who never miss class and study hard generally earn higher grades than those who do not. This is an example of: market failure. specialization. marginal cost. incentives.

incentives

A shortage in the market for economics textbooks will ___________ the equilibrium price of textbooks. decrease initially not change but then decrease increase not change

increase

According to the law of demand, a decrease in the price of a product will lead to which result? Please choose the correct answer from the following choices, and then select the submit answer button. The quantity demanded will increase. The quantity demanded will decrease. The quantity demanded will be unaffected by this event. The quantity demanded will either rise or fall depending on other factors.

increase

Which of the following would cause a country's production possibilities frontier (PPF) to shift outward? Please choose the correct answer from the following choices, and then select the submit answer button. a decrease in production capital lower literacy a civil war increased population

increased population

All else equal, when the market price falls below equilibrium, consumer surplus: Please choose the correct answer from the following choices, and then select the submit answer button. equals producer surplus. stays the same. decreases. increases.

increases. Consumer surplus generally increases when prices fall.

When we have a warped/bowed outward production possibility frontier it is due to which of the following? Please choose the correct answer from the following choices, and then select the submit answer button. unlimited resources non-specialized resources increasing opportunity costs limited resources

increasing opportunity cost

Rhea just lost his job. Because of this decrease in his income he eats more bologna sandwiches. In this example, bologna sandwiches are what type of good?

inferior good An inferior good is a good where an increase in income results in declining demand.

Opportunity costs: influence all economic decisions. decrease as individuals become wealthier. involve monetary rather than non-monetary costs. are generally the same from individual to individual.

influence all economic decisions.

Opportunity costs: involve monetary rather than non-monetary costs. decrease as individuals become wealthier. are generally the same from individual to individual. influence all economic decisions

influence all economic decisions.

Markets work efficiently when:

information is widely available. Markets work efficiently when accurate information is widely available to all parties involved in transactions.

If an economy is producing at a point inside its production possibilities frontier: full employment is achieved. it is possible to produce more of one good without giving up some of the other good. it is producing beyond its production possibilities. it is producing efficiently.

it is possible to produce more of one good without giving up some of the other good.

If a country has few resources: it will still have a comparative advantage in a good or service. trade will never occur. specialization would be useless. trade will not increase the GDP.

it will have a comparative advantage in a good or service

Resources are: unlimited, but efficiency is limited. unlimited, but wants are limited. limited, but wants are unlimited. limited, but efficiency is unlimited.

limited, but wants are unlimited.

Principle 1 of economics

making choices with limited resources

an institution that enables buyers and sellers to interact and transact with one another is called a: Please choose the correct answer from the following choices, and then select the submit answer button. price socialism command economy Correct: market market

market

Tom is looking to buy a new laptop battery online. He wants to save money by buying used, but the problem is that he doesn't know how much life is left in the battery he's going to buy. This problem of asymmetric information could lead to: Please choose the correct answer from the following choices, and then select the submit answer button. less competition. external benefits. efficient allocation of resources. market failure.

market failure. The people selling used batteries online know more about how used the battery is than the buyer. This is one of the reasons market failure occurs.

Consumer surplus is the difference between willingness to pay and: Please choose the correct answer from the following choices, and then select the submit answer button. willingness to sell. market price. marginal cost. producer surplus.

market price

Principle 6 of economics

markets are generally efficient government can sometimes correct the market failure

Which mechanism is the MOST efficient at allocating resources? Please choose the correct answer from the following choices, and then select the submit answer button. the government markets with many external benefits markets with limited external costs and benefits markets with many external costs

markets with limited external costs and benefits Markets with limited external costs and benefits are the most efficient at allocating resources.

A price ceiling is a(n) _____ price for a good. Please choose the correct answer from the following choices, and then select the submit answer button. maximum equilibrium fair minimum

maximum A price ceiling is the maximum price allowed by law.

Consumer surplus is the difference between the: maximum price the seller is willing to pay and the market price. maximum price the buyer is willing to pay and the market price. minimum price the seller is willing to pay and the market price. minimum price the buyer is willing to pay and the market price.

maximum price the buyer is willing to pay and the market price.

Professor Green teaches environmental economics at your university. You find out that the professor has also written books about labor markets. It is most likely that your professor is:

microeconomists

The supply curve represents the _____ price at which a firm is willing to _____. minimum; sell various quantities of a good maximum; sell various quantities of a good maximum; pay for inputs minimum; pay for inputs

minimum; sell various quantities of a good

As the opportunity cost of a good decreases, people buy A) less of that good and also less of its complements. B) less of that good but more of its complements. C) more of that good but less of its complements. D) more of that good and also more of its complements

more of that good and also more of its complements.

If a price ceiling is set above the equilibrium price: quantity supplied exceeds quantity demanded. a shortage occurs in the market. a surplus results in the market. no impact is felt in the market.

no impact is felt in the market.

Suppose the price of a tablet is $279. Lexi has no consumer surplus. How much is she willing to pay?

no more than $279

Suppose you are trying to understand the effect that an increase in the price of grapes will have on the market for wine. An effective model to determine this effect is one that evaluates the change in the price of grapes on the market quantity of wine assuming: buyers' incomes also change. buyers' preferences and incomes also change. some wines use different grapes. no other change takes place.

no other change takes place.

If an increase in income causes an increase in the demand for a good, then the good is called a(n) _____ good. Please choose the correct answer from the following choices, and then select the submit answer button. normal inferior substitute complementary

normal

If the demand for digital cameras increases when consumers' income rise, then digital cameras are: a normal good an inferior good a substitute good for video cameras a complement to video cameras

normal good

What is the difference between a change in quantity supplied and a change in supply? A change in the quantity supplied shifts the supply curve, and a change in supply simply moves along the supply curve. A change in the market price affects the supply, but not the quantity supplied. There is no difference. A change in the market price affects the quantity supplied, but not the supply.

not A

There is a(n) _____ relationship between price and quantity demanded. indeterminate, positive, and negative negative indeterminate positive

not c

Suppose you and your roommate have the following agreement when it comes to cleaning your apartment: each person washes her or his own dishes after each meal. The principle of trade you just learned tells you that it would be more efficient if: both of you wash your own dishes after each meal. none of you wash the dishes after eating. each of you wash half of all the dirty dishes. one of you wash all the dishes while the other did a different chore.

one of you wash all the dishes while the other did a different chore.

)When you take the effort to dispute a parking ticket, you must take into account the cost of your time, which is called: explicit cost accounting cost economic cost opportunity cost

opportunity cost

Comparative advantage occurs when one country has a lower _____ of producing a good than another country

opportunity cost

Comparative advantage occurs when one country has a lower __________ of producing a good than another country. labor cost capital cost land cost opportunity cost

opportunity cost

Each hour that one spends studying economics is an hour that could be used for some other activity. The value of the most valuable activity given up to study economics is called a(n): marginal cost marginal benefit incentive opportunity cost

opportunity cost

The highest valued alternative that is forgone when you choose an action is called its: scarcity. utility. benefit. opportunity cost.

opportunity cost.

Employers give stock options to full-time employees who have been on the job more than three years. This is an example of: thinking on the margin. irrational behavior. people following incentives. opportunity costs.

people following incentives.

15. Markets tend to be efficient because: Adam Smith created markets. people respond to incentives. decisions are always made at the margin. entrepreneurs always try to produce at the lowest possible cost.

people respond to incentives.

Asymmetric information:

prevents markets from reaching a socially desirable outcome. Asymmetric information, while not causing markets to completely collapse, does affect the efficiency with which they allocate goods and services. Therefore, asymmetric information is a reason markets fail

Asymmetric information: Please choose the correct answer from the following choices, and then select the submit answer button. causes common property resources to be overused. prevents markets from reaching a socially desirable outcome. allows markets to reach a socially desirable outcome. causes markets to collapse.

Suppose the equilibrium price in a market is $10. The government sets a minimum price of $12. This price of $12 is an example of a(n): Please choose the correct answer from the following choices, and then select the submit answer button. price floor. price ceiling. equilibrium price. fair price.

price floor. A price floor is a minimum price for a good.

Many large farms in the United States now use combine harvesters equipped with GPS. The navigation technology not only allows farmers to harvest at night, but it also helps them map out the most efficient way to plant and fertilize their crops, reducing waste. By using this new technology farmers can better achieve what type of efficiency?

production efficiency

When an economy uses the most efficient means of farming to grow as much corn as possible, this economy has achieved: neither production efficiency nor allocative efficiency. allocative efficiency but not necessarily production efficiency. production efficiency and allocative efficiency. production efficiency but not necessarily allocative efficiency.

production efficiency but not necessarily allocative efficiency.

When an economy uses the most efficient means of farming to grow as much corn as possible, this economy has achieved: neither production efficiency nor allocative efficiency. allocative efficiency but not necessarily production efficiency. production efficiency but not necessarily allocative efficiency. production efficiency and allocative efficiency.

production efficiency but not necessarily allocative efficiency.

A nation's standard of living is primarily a function of: productivity. national defense. natural resource availability. government benefits.

productivity.

If the equilibrium price of solar panels is $200 per panel, but a price ceiling of $150 per panel is imposed, what happens to the market for solar panels? 1) quantity demanded exceeds quantity supplied and a surplus occurs 2) quantity demanded exceeds quantity supplied and a shortage occurs 3) quantity supplied exceeds quantity demanded and a surplus occurs 4) quantity supplied exceeds quantity demanded and a shortage occurs

quantity demanded exceeds quantity supplied and a shortage occurs

large increase in demand and increase in supply

quantity increase price increase

A payment to a landowner for mineral rights would be called: Please choose the correct answer from the following choices, and then select the submit answer button. interest. rent. profit. wages.

rent

The development of solar panels for home installation has improved due to technological advances and subsidies. These factors shift the supply curve to the _____ and result in the equilibrium price of solar panel installations to _____. right; rise left; fall left; rise right; fall

right; fall

Which is an example of capital in the production process of an amusement park? the electricity used at the park the mechanics who maintain the equipment the ticket-taker the roller coaster

roller coaster

If Sally can make 10 free throws in one minute or 3 three-point baskets in one minute, while Jesse can make 8 free throws in one minute or 1 three-point basket in one minute, ___has an absolute advantage in free throws and ___ has a comparative advantage in free throws Sally; Sally Sally; Jesse Jesse; Sally Jesse; Jesse

sally;jesse

For a price floor to be effective, or binding, it must be: Please choose the correct answer from the following choices, and then select the submit answer button. set higher than a price ceiling. set below the equilibrium price. set above the equilibrium price. set at the equilibrium price.

set above the equilibrium price. To be effective, a price floor must be set above the equilibrium price. These government-set prices are imposed because the market price is seen as too high.

On his Justified tour, Justin Timberlake wore a fedora. A new trend was born. The demand for fedoras: Please choose the correct answer from the following choices, and then select the submit answer button. became a vertical line. became a horizontal line. shifted to the left. shifted to the right.

shifted to the right. Fashions and other trends represent a change in consumer preferences. In this case we'd expect the demand to increase, shown as a rightward shift of the demand curve.

Total surplus is a measure of the net benefits _____ achieve(s) when both consumers and producers are valued components of an economy. Please choose the correct answer from the following choices, and then select the submit answer button. government consumers society producers

society Total surplus is a measure of the net benefits society achieves when both consumers and producers are valued components of an economy.

Which of the following can lead to gains for all parties as long as exchange is possible and those involved trade in a mutually beneficial manner? marginal analysis market failure specialization opportunity cost

specialization Specialization occurs when people (or countries) engage in the economic activity in which they have the greatest advantage over others

When the price of beef goes up, demand for chicken increases and demand for french fries decreases. This means beef and chicken are _____ and beef and french fries are _____. substitutes; substitutes substitutes; complements complements; substitutes complements; complements

substitutes; complements

A decrease in the cost of production of a good causes an increase in the _____ of that good. Please choose the correct answer from the following choices, and then select the submit answer button. buyers value supply demand

supply

. People Respond to Incentives, Both Good and Bad Incentives encourage people to work hard and be more productive.

A decrease in the price of soda pop will cause a reduction in quantity supplied, shown as a movement downward along the original supply curve.

CONSUMER AND PRODUCER SURPLUS: A TOOL FOR MEASURING ECONOMIC EFFICIENCY Consumers and producers attempt to maximize their well-being by achieving the greatest gains in their market transactions. Consumer surplus occurs when consumers would have been willing to pay more for a good or service than the actual price paid. It represents a form of savings to consumers. Producer surplus occurs when businesses would have been willing to provide a good or service at prices lower than the market price. It represents a form of earnings to producers.

Chapter 2

Consumer surplus is the difference between a person's willingness-to-pay and the price paid. For a market, consumer surplus is the area between the demand curve and the market price. In the figure, consumer surplus equals $1,250. Producer surplus is the difference between the price a seller receives and its willingness-to-sell. For a market, producer surplus is the area between the market price and the supply curve. In the figure, producer surplus equals $1,000

Markets Are Generally Efficient; When They Aren't, Government Can Sometimes Correct the Failure Markets bring buyers and sellers together. Competition forces firms to provide products at the lowest possible price. New products are introduced to the market and old products disappear. This dynamism makes markets efficient. In some instances, though, markets might fail, such as in dealing with pollution, leading governments to intervene to correct the failure.

PRICE CEILINGS AND PRICE FLOORS Governments use price floors and price ceilings to intervene in markets. A price ceiling is a maximum legal price that can be charged for a product. Price ceilings set below equilibrium result in shortages. A price floor is the minimum legal price that can be charged for a product. Price floors set above market equilibrium result in surpluse

Rational Behavior Requires Thinking on the Margin When making a decision involving benefits and costs, one should continue to consume or produce as long as the marginal (additional) benefit exceeds the marginal (additional) cost.

SUPPLY Supply is the quantity of a product producers are willing and able to put on the market at various prices, all other relevant factors being held constant. The law of supply reflects the positive relationship between price and quantity supplied: The higher the market price, the more goods supplied, and the lower the market price, the fewer goods supplied. As with demand, market supply is derived by horizontally summing the individual supplies of all of the firms in the market. A change in supply occurs when one or more of the determinants of supply change. The determinants of supply are production technology, the cost of resources, prices of related commodities, expectations about future prices, the number of sellers or producers in the market, and taxes and subsidies. A change in supply is a shift in the supply curve. A shift to the right reflects an increase in supply, while a shift to the left represents a decrease in supply. A change in quantity supplied is only caused by a change in the price of the product; it results in a movement along the existing supply curve.

USING CONSUMER AND PRODUCER SURPLUS: THE GAINS FROM TRADE The sum of consumer surplus and producer surplus is total surplus, a measure of the overall net benefit for an economy. Markets are efficient when all buyers and all sellers willing to buy and sell at the market price are able to do so. When buyers and sellers engage in a market transaction, gains from trade are created from consumer surplus and producer surplus. Total surplus is maximized at a market equilibrium. Deadweight loss is created when markets deviate from equilibrium. Markets are typically efficient, although sometimes they can fail by not providing the socially optimal amount of goods and services. Market failure is caused by a lack of competition, mismatched information, external costs and external benefits, or the existence of public goods.

if he doesnt tell us which factor isn't stronger you say unknown

laissez-faire A market that is allowed to function without any government intervention. "let it be"

productivity= output/inputs

total surplus The sum of consumer surplus and producer surplus, and a measure of the overall net benefit gained from a market transaction.

Driving your car in a large city during rush hour causes externalities because: gasoline is scarce, and you must pay for it. it adds to road congestion and pollution. gasoline is a public good. your actions will benefit others, but you will be unable to charge them for the service.

t adds to road congestion and pollution.

production efficiency

the ability to produce goods at their lowest cost

allocative efficiency

the ability to produce goods that society desires

Suppose you have a choice between studying one more hour for your history exam or studying one more hour for your psychology exam. Your decision on what to study should be based on: the additional benefits of studying for each class. the class you like the most. how much time you have already studied for each class. your current average scores in each class.

the additional benefits of studying for each class.

Madeline normally flies to San Francisco to visit family over the holidays, but airline ticket prices have increased by $400. Madeline no longer can afford this ticket, so she decides to stay home for the holidays. Who benefits from this price increase?

the air lines

A good is a normal good if: normal people buy it when the price increases. the demand curve shifts back inward if income increases. the demand curve shifts only when the GDP changes. the demand curve shifts outward if income increases.

the demand curve shifts outward if income increases.

In which market is government most likely to intervene to prevent a market failure? the jewelry market the market for college education the restaurant market the market for designer clothing

the market for college education

In which market is government most likely to intervene to prevent a market failure? the restaurant market the market for designer clothing the market for college education the jewelry market

the market for college education

Because prices contain useful information for buyers and sellers, the market economy is sometimes called: Please choose the correct answer from the following choices, and then select the submit answer button. the price system. a socialist economy. a planned economy. the seller's system.

the price system. Because prices contain useful information for buyers and sellers, the market economy is sometimes called the price system.

According to the law of demand, an increase in the price of a product will lead to which result? Please choose the correct answer from the following choices, and then select the submit answer button. The quantity demanded will decrease. The quantity demanded will be unaffected by this event. The quantity demanded will increase. The quantity demanded will either rise or fall depending on other factors.

the quantity demanded will decrease. The law of demand states that, while holding all other relevant factors constant, as price increases, quantity demanded falls.

Tim woke up this morning with a stomachache and decided to skip class in order to get more rest. What is the opportunity cost of Tim's decision to sleep in? the actual enjoyment of lying in bed instead of sitting in class the level of pain he endured from the stomachache the improvement in how he feels by getting more rest the value of attending the class he decided to miss

the value of attending the class he decided to miss

Kevin has three options on how to spend his Saturday afternoon: go out with friends, watch a movie, or wash his car. Kevin's opportunity cost of washing his car would be: the value of going out with friends. the value of watching a movie. the value of going out with friends AND watching a movie. the value of going out with friends OR watching a movie.

the value of going out with friends OR watching a movie.

Markets work most efficiently when: Please choose the correct answer from the following choices, and then select the submit answer button. buyers and sellers have different information. there are many public goods. there are many external costs and benefits. there are many buyers and sellers.

there are many buyers and sellers. Competitive markets, with many buyers and sellers, are more likely to be efficient than noncompetitive markets

Hitting your snooze alarm before you get out of bed is an example of: thinking at the margin. efficiency. equity. market equilibrium.

thinking at the margin

Principle 5 of economics

thinking on the margin marginal benefit vs marginal cost MB=MC

Prices provide information: Please choose the correct answer from the following choices, and then select the submit answer button. to sellers only. to buyers and sellers. to the government only. to buyers only.

to buyers and sellers. Prices provide information to everyone involved in the transaction.

An increase in tax on the sale of a good would cause the supply curve for that good to shift:

to the left

More sellers of a product would cause the supply curve for that product to shift:

to the right

Flu vaccination shots provide external benefits. Thus: too many flu vaccination shots are given. the private market provides the socially desirable output of shots. the private market collapses. too few flu vaccination shots are given.

too few flu vaccination shots are given

Two countries can achieve the greatest overall benefits when: no trade occurs between them one country is able to produce everything for both countries trade occurs based on each country's absolute advantage trade occurs based on each country's comparative advantage

trade occurs based on each country's comparative advantage

Bolivia has about 50% of the world's reserves of lithium. It is also a major producer of zinc. Suppose that Bolivia produced only those two goods and that its linear production possibilities frontier had the following end points: 20,000 tons of lithium and zero zinc, or 10,000 tons of zinc and no lithium. A combination of 12,000 tons of lithium and 5,000 tons of zinc would be: efficient but not attainable. attainable, but not efficient. unattainable.

unattainable

Producing at a point on the PPF means that a country's resources are: used efficiently underutilized used inefficiently overutilized

used efficiently

Suppose Washington High School students, in one semester, can complete 10 science projects or 5 English essays. Lincoln High school students can complete only 6 science projects but can complete 12 English essays in a semester. What is the opportunity cost of a science project (in terms of essays) for each student? Washington = 2 essays and Lincoln = 2 essays Washington = 2 essays and Lincoln = ½ essay Washington = ½ essay and Lincoln = ½ essay Washington = ½ essay and Lincoln = 2 essays

washington = ½ essay and Lincoln = 2 essays

Utility ranking

what gives you the most satisfied

absolute advantage

when a country can produce more of a good than another country

comparative advantage

when one can produce a good at a lower oppportunity cost

market clears

when quantity demanded equals quantity supplied and there is no surplus or shortage selling at market equilibrium

A surplus exists: when quantity supplied is less than quantity demanded. at the market clearing price. when quantity supplied exceeds the quantity demanded. any time the market is out of equilibrium.

when quantity supplied exceeds the quantity demanded.

According to the law of supply, if the price of cars decreases, what will happen to the quantity of cars supplied?

will decrease

Consumer surplus is the difference between market price and: Please choose the correct answer from the following choices, and then select the submit answer button. willingness to sell. marginal cost. willingness to pay. price.

willingness to pay. Consumer Surplus = Willingness to Pay − Price.

Producer surplus is the difference between market price and: Please choose the correct answer from the following choices, and then select the submit answer button. willingness to pay. willingness to sell. price. consumer surplus.

willingness to sell. Producer surplus is the difference between price and willingness to sell.

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