Module quizzes
What would probably occur if government policies to reduce poverty or to encourage economic equality, were taken to extremes?
It would reduce incentives for economic output.
When an owner uses resources they own in a business, that usage should be considered _______
implicit cost
The demand for labor is a derived demand because
it is dependent on the demand for output.
What are the factors of production?
land, economic capital, labor, entrepreneurship
The ability of a model to predict outcomes (accurately) is an indicator that
the assumptions of the model are generally accurate.
If incomes rise for both low-income and high-income workers, but rise less for the high-income workers,
then poverty will fall and inequality will fall.
What is total surplus area?
$210
Which of the following are examples of economic activities with negative externalities?
A gold mine discharging arsenic into a natural lake that it's using for a tailings pond.
Which of these are used to determine the poverty line in the U.S.?
Amount of income to cover basic standard of living.
Which of the following describe a product with an inelastic demand?
An appointment with a dentist.
Why would businesses choose to reduce pollution?
Because their marginal cost is lower or equal to the marginal benefit of the reduction.
What is a key difference between the short run and the long run?
In the long run, all resources are variable; in the short run, at least one resource is fixed.
Where does an earning gap continue to exist in the U.S.?
It exists between both gender and race.
Most demand curves have a negative slope because
Most demand curves have a negative slope because
The earnings gap in the U.S. labor market between black and white workers ________.
The earnings gap in the U.S. labor market between black and white workers ________.
What happens to the value of a firm's additional output sold when the firm has some market power?
The value of that additional output sold is its marginal revenu
Which of the following is a potential source of income inequality?
Wage disparity
Which of the following are examples of positive externalities?
You are a bird watcher, and your neighbor puts up birdhouses and gardens to attract birds.
A Lorenz curve graphs the ________ received by everyone up to a certain quintile.
cumulative shares of income
If immigration consists of mainly high-skilled workers, then a(n) ________ in immigration will ________ the wages of high-skilled workers.
decrease; increase
The concept of derived demand of labor means that
demand for labor is created from a demand for a good or service
Economist use the ________ method to study income distribution in an economy.
dividing a whole group into fifths, or quintiles
In economics, functions often describe cause and effect. In an economic function, the variable being described on the left-hand side represents a(n) ________?
effect
A source of income inequality is ________.
family structure
Employment will be lower in a(n) ________ competitive industry than in a ________ competitive industry
imperfectly; perfectly
Over the past half of a century in the United States, ethnic diversity and racial diversity is ________.
increasing
The effects of a poverty trap can be reduced by ________.
initially decreasing the government payments by smaller amounts
For firms with market power, they choose the number of workers where the market wage equals the firm's ________.
marginal revenue product
A public good is a good that is ________, and thus is difficult for market producers to sell to individual consumers.
nonexcludable and nonrivalrous
Which is a true statement about marginal benefit?
o an individual, one good may have a larger marginal benefit than than another.
When the social benefit of producing a good is higher than the private benefit, then
positive externalities exist.
An extremely high degree of ________, with very high taxes on the rich, would be likely to discourage work and entrepreneurship.
redistribution
Markets are inefficient when
social costs are different from private costs
The poverty line is determined by ________.
the level of income needed to cover basic needs
Economists would say that the decisions we make are influenced by
trade offs
If U.S. immigration consists of mainly low-skilled workers, then an increase in immigration ________ the wages of low-skilled workers.
will reduce
In order to maximize profit, firms will choose to
use the combination of available resources and technology that will minimize cost.
In October and November, Annabelle purchased winter sweaters and tights and spent all her clothing budge on those items. Each sweater was $100. At Annabelle's optimal choice, her marginal utility from the last sweater purchased is 400 and her marginal utility from the last pair of tights purchased is 200. This means that each pair of tights must cost ________.
$50
oseph has a budget of $11 to spend at the food court in the mall. His two favorite items are tacos (Product X) which cost $5 and cinnamon buns (Product Y) which cost $2. In the schedule below you can see the marginal utility for each of his favorite foods. What combination would maximize Joseph's utility and meal?
1 Taco and 3 cinnamon buns
The table below shows cost data for WipeOutSki Company, which manufactures skis for beginners. If the company's fixed costs are $30, what is the average variable cost in A?
12.50
A business produces 10 units of output. Its average variable cost (AVC) = $25, average fixed cost (AFC) = $5, and marginal cost (MC) = $30. The firm's average total cost (ATC) is ________.
30
f Pepsi goes on sale, what will happen to the demand for Coca-Cola?
Demand for Coca-Cola will decrease
Elasticity measures the behavioral response of economic agents in a given situation. Which question is likely to be answered using elasticity?
If a restaurant puts their pizza on sale, will the additional number of pizzas sold offset the discount on each item? Will their sales revenues for pizza go up or down?
Consider peanut butter as a normal good and answer the questions of what would happen if a decrease in income occured?
It would cause the quantity consumed of peanut butter to decrease.
Kevin is maximizing his utility consumption of almond butter sandwiches and sushi. There is a boom in fish in the summer and the price of sushi suddenly drops. What will the price change most likely change in Kevin's consumption behaviour?
Kevin will increase consumption with the bundle of goods at a new higher indifference curve tangent to the new budget constraint.
What happens to marginal cost if a business's average total cost is decreasing?
Marginal cost must be lower than average total cost.
t is said that the rational consumer will act according to his or her self-interest, and that self-interest can include a concern for one's family and friends, but not often society as a whole. Which of the following illustrates this type of decision?
The boat rental was worth the additional fish caught, regardless of how little fish we left behind.
Which topic below best applies to microeconomics?
The price that a farmer asks for her watermelons.
The reason the substitution effect works to encourage a consumer to buy less of a product when its price increases is Correct!
The product is now relatively more expensive than it was before.
How does a production possibilities model differ from a budget constraint model?
The production possibilities model demonstrates diminishing returns
The largest national herbal supplement store is running a sale on its excess supply of Vitamin C supplements. With this new price change what do you think will happen to the Vitamin C supplement market?
There will be an increase only in the quantity demanded
According to the law of demand, assuming other factors are held constant,
as the price of bread increases, the quantity of bread demanded will decrease.
According to the law of supply, assuming other factors are held constant
as the price of milk decreases, the quantity of milk supplied will decrease.
Which of the following represents producer surplus?
b
Land, or natural resources, include(s) the fertility of the land, minerals below it, and
climate
Self-interest is not necessarily selfish, some say. In fact, self-interest likely includes an individual's consideration for
close friends and family.
Making an economically rational decision requires
considering prospective benefits and costs to oneself
When the Long Run Average Cost (LRAC) curve is horizontal, it implies that there are ________.
constant returns to scale
Antitrust laws help guard against mergers that could hurt ________.
consumers
Greg eats pizza every day of the week. The marginal utility of pizza will most likely ________ by the end of the week, and all else being equal, this demonstrates the law of ________.
decrease; diminishing marginal utility
The price for a cell phone case is $25 with the quantity demanded at 10,000 a day. As time goes on the price for a cell phone case increases to $30 and the quantity demanded decreases to 5,000 a day. Based on the price elasticity of demand using the midpoint method, this cell phone case is
elastic
price ceiling creates ________ when it is set ________ the equilibrium price.
excess demand; below
Price floors typically result in ________.
excess supply
A price floor creates ________ when it is set ________ the equilibrium price.
excess supply; above
Marcus is considering which college major to choose. In taking a rational approach, Marcus should consider
he benefit each major would bring and the cost of the degree.
marginal cost
he cost of obtaining or producing one more unit of something.
When a 10% increase in income causes a 4% increase in quantity demanded of a good
he income elasticity is .4 and the good is a normal good.
Total revenue is defined as ________ and represented as ________.
he price of a product times the number of units sold; TR=P x Qd
Budget constraints impose scarcity. They are based upon
he prices of the items purchased.
Suppose the local government is concerned about the health of local school children, and for that reason imposes a price ceiling of $3 on yogurt. Based on the graph below, which of the following is true?
he quantity supplied will be 3 yogurts (red supply line intersect the price ceiling line)
Accounting profit tends to be
higher than economic profit because economic cost includes implicit and explicit costs.
The flatter the demand curve, the ________.
higher the elasticity of demand
Price ceilings attempt to make consumer prices
lower
economic capital is productive, so it does NOT include
money
Which of the following is most likely to be a fixed cost?
mortgage payments
f the price of organic beef steak, regular beef steak, and pork chops each increased by 10%. Which of the products would you think was the most elastic. In other words, which has the most change to the quantity demanded because of the increase in price?
organic beef steak
Consumer surplus is best described as the extra benefit consumers receive when they ________. Correct!
pay less than they would have been willing to pay
The cross-price elasticity of demand is ________ for substitute goods and ________ for complementary goods
positive; negative
When certain assumptions are used to create a model of reality, its value can be tested and determined by its ability to
predict outcomes.
The federal minimum wage is an example of a
price floor
The production possibilities model illustrates an inverse relationship between two goods or services because
production of different types will compete for limited resources.
In order to explain consumer behavior that is irrational, behavioral economics uses observations from ________.
psychology
Elastic supply occurs if the change in quantity supplied is ________ to a change in price.
relatively responsive
Price ceilings typically result in ________
shortages
You are a lawyer representing a client who lost their $1 million home in a house fire. They are suing the home's architect as design flaws were a major cause of the fire. How large would the damages awarded by the court to your client need to be in order for them to be equally happy as they were before the fire?
some amount greater than $1 million
The advantages that society gains through trade lie in the ability to
specialize resources to the uses where opportunity cost is minimized.
An Uber driver faces costs for driving that include sunk costs like insurance that contribute to the average cost per mile of $.50. Yet when a rider offers to pay less than that for a ride, the driver agrees because
sunk costs like auto insurance (in this case) do not increase as driving increases.
A drought decreases the supply of agricultural products. This means that at any given price, a lower quantity will be supplied. Conversely, especially good weather would shift the
supply curve to the right.
f a technology change reduces a company's production costs, i.
t will shift the supply curve to the right
The utility an individual will receive from consuming a good is determined by
that individual's own preferences.
Marginal product refers to
the change in output or production divided by the change in variable inputs (labor).
he elasticity of demand is defined as
the percentage change in quantity demanded divided by the percentage change in price.
Scarcity is a condition that is everywhere and always, since it is based upon two assumptions that reflect permanent universal conditions. The assumptions are that more output will satisfy more wants and
the world has limited productive resources.
A competitive market is one in which
there is a large number of buyers and sellers.
