Microeconomics - Exam 1
Refer to the above diagram. Starting at point E, the production of successive units of bread will cost:
1/8, 1/6, 1/4, and 1/2 units of tractors
Refer to the above diagram. This economy will experience unemployment if it produces at point:
D
Which of the following statements is correct?
If supply increases and demand decreases, equilibrium price will fall.
"In the corn market, demand often exceeds supply and supply sometimes exceeds demand. The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms "demand" and "supply" being used correctly?
In the second statement.
If the price elasticity of demand for gasoline is 0.20:
a 10 percent rise in the price of gasoline will decrease the amount purchased by 2 percent.
Which of the following is real capital?
a construction crane
Because of their scarcity, the efficient use of resources is:
an important issue in all economics.
When the percentage change in price is greater than the resulting percentage change in quantity demanded:
an increase in price will increase total revenue.
Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?
an increase in supply
Which of the following lists includes only capital resources (and therefore no labor or land resources)?
autos owned by a car rental firm; computers at the car rental agency; the vans that shuttle rental customers to and from the airport.
The rationing function of prices refers to the:
capacity of a competitive market to equate the quantity demanded and the quantity supplied.
The demand for a product is inelastic with respect to price if:
consumers are largely unresponsive to a per unit price change.
An increase in the price of a product will reduce the amount of it purchased because:
consumers will substitute other products for the one whose price has risen.
If products A and B are complements and the price of B decreases the:
demand for A will increase and the amount of B demanded will increase.
If a demand for a product is elastic, the value of the price elasticity coefficient is:
greater than 1
The production possibilities curve illistrates the basic principle that:
if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
Refer to the above diagram. Other things equal, this economy will achieve the most rapid growth if:
if chooses point A
Other things equal, an excise tax on a product will:
increase its price
If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:
increase the quantity demanded by about 25 percent.
A demand curve:
indicates the quantity demanded between price and quantity supplied.
The economizing problem is one of deciding how to make the best use of:
limited resources to satisfy virtually unlimited wants
A decrease in quantity demanded (as distinct from oa decrease in demand) is depicted by a:
move from point y to x.
Which of the following is a land resource?
natural gas
The demand for most products varies directly with changes in consumer incomes. Such products are known as:
normal goods
The basic formula for the price elasticity of demand coefficient is:
percentage change in quantity demanded/percentage change in price
The location of the product supply curve depends on:
production technology
A nation's production possibilities curve is "bowed out" from the origin because:
resources are not equally efficient in producing every good.
A decrease in demand is depicted by a:
shift from D2 to D1.
A leftward shift of a product supply curve might be caused by:
some firms leaving an industry.
"Because of unseasonably cold weather, the supply of oranges has substantially decreased." This statement indicates that:
the amount of oranges that will be available at various prices has declined.
When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes:
the income effect
Refer to the above diagram. This production possibilities curve is constructed so that:
the opportunity cost of both bread and tractors increases as more of each is produced.
In constructing a stable demand curve for product X:
the prices of other goods are assumed constant.
The fundamental problem of economics is:
the scarcity of productive resources relative to economic wants.
The concept of price elasticity of demand measures:
the sensitivity of consumers to price changes.
"When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower." This statement describes:
the substitution effect.
If the production possibilities curve is a straight line:
the two products are equally important to consumers.
When the economist says that economic wants are insatiable, this means that:
these wants are virtually unlimited and therefore incapable of complete satisfaction.