Principles of Economics
Suppose your expenses for this term are as follows: tuition: $28,000, room and board: $9,000, books and other educational supplies: $2,500. Further, during the term, you can only work part-time and earn $16,000 instead of your full-time salary of $42,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?
A. $36,500 B. $72,500 C. $65,500 D. $56,500 Answer: D 28,000+2,500+26,000 = 56,500
What is the opportunity cost of one pound of vegetables?
A. 1 1/4 pounds of meat B. 3/4 pound of meat C. 1.2 pounds of meat D. 12 pounds of meat Answer: B
If the economy is currently producing at point W, what is the opportunity cost of moving to point X?
A. 19 million tons of steel B. 5 million tons of paper C. 3 million tons of steel D. 9 million tons of paper Answer: b
If the economy is currently producing at point D, what is the opportunity cost of moving to point B?
A. 23 thousand hammers B. 0 hammers C. 30 thousand wrenches D. 8 thousand wrenches Answer: B
An increase in the expected future price of the product would be represented by a movement from
A. A to B. B. D2 to D1. C. D1 to D2. D. B to A. Answer: C
A decrease in taste or preference would be represented by a movement from
A. D1 to D2. B. B to A. C. A to B. D. D2 to D1. Answer: D
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
A. There is no difference between the two terms; they both refer to a shift of the demand curve. B. There is no difference between the two terms; they both refer to a movement downward along a given demand curve. C. An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve. D. An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve. Answer: D
If, in response to an increase in the price of chocolate, the quantity of chocolate demanded decreases, then economists would describe this as
A. a change in consumer income. B. a decrease in quantity demanded. C. a decrease in consumers' taste for chocolate. D. a decrease in demand. Answer: B
A movement along the demand curve for toothpaste would be caused by
A. a change in the price of toothbrushes. B. a change in population. C. a change in the price of toothpaste. D. a change in consumer income. Answer: C
If a decrease in income leads to a decrease in the demand for mac and cheese, then mac and cheese is
A. a necessity. B. a complement. C. a normal good. D. a neutral good. Answer: C
The Great Depression of the 1930s, with a large number of workers and factories unemployed, would be represented in a production possibilities frontier by?
A. a point on the frontier. B. a point outside the frontier. C. a point inside the frontier. D. an intercept on either the vertical or the horizontal axis. Answer: C
Consider the following movements: a.from point V to point W b.from point W to point Y c.from point Y to point Z Which of the movements listed above represents advancements in technology with respect to only plastic production?
A. a, b, and c B. b and c only C. c only D. b only Answer: C
Which of the following would shift a nation's production possibilities frontier outward?
A. an increase in demand for the nation's products B. a law requiring workers to retire at age 50 C. discovering a cheaper way to convert sunshine into electricity D. a decrease in the unemployment rate Answer: C
Consider the following events: a. a decrease in the unemployment rate b. general technological advancement c. an increase in consumer wealth Which of the events listed above could cause a movement from V to W?
A. b and c only B. a and b only C. a, b, and c D. a only Answer: D
Assume that Tomaso's Trattoria only produces pizzas and calzones. Tomaso faces ________ opportunity costs in the production of pizzas and calzones.
A. decreasing B. negative C. increasing D. constant Answer: D
Sergio Vignetto raises cattle and llamas on his land. His land is equally suitable for raising either animal. Which of the graphs in Figure 2-3 represent his production possibilities frontier?
A. either Graph A or Graph C B. Graph B C. Graph C D. Graph A E. either Graph B or Graph C Answer: D
Suppose that when the price of hamburgers decreases, the Landry family decreases their purchases of chicken nuggets. To the Landry family
A. hamburgers and chicken nuggets are normal goods. B. hamburgers and chicken nuggets are complements. C. hamburgers and chicken nuggets are inferior goods. D. hamburgers and chicken nuggets are substitutes. Answer: D
The table above shows the demand schedules for caviar of two individuals (Ari and Sonia) and the rest of the market. If the price of caviar rises from $65 to $75, the market quantity demanded would
A. increase by 52 oz. B. decrease by 36 oz. C. decrease by 52 oz. D. increase by 36 oz. Answer: B
Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are
A. substitutes. B. complements. C. both inferior goods. D. both luxury goods. Answer: B
If the price of music downloads was to decrease, then
A. the demand for MP3 players would increase. B. the quantity of MP3 players demanded would decrease. C. the demand for MP3 players would remain constant. D. the demand for MP3 players would decrease. Answer: A
Suppose the cross-price elasticity of demand between DVDs at Amazon.com and DVDs at Rakuten.com is 3.5. Based on this information, predict what happens when Amazon.com lowers its DVD prices by 10 percent. A. The quantity of DVDs demanded on Amazon.com will increase by 35 percent. B. The quantity of DVDs demanded on Rakuten.com will decrease by 35 percent. C. The quantity of DVDs demanded on Amazon.com will decrease by 35 percent. D. The quantity of DVDs demanded on Rakuten.com will increase by 35 percent.
Answer: ?
An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in A. an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease. B. a decrease in the equilibrium quantity of lobster and no change in the equilibrium price. C. an increase in the equilibrium price of lobster and no change in the equilibrium quantity. D. a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or decrease.
Answer: A
Economists estimated that the income elasticity of beer is 0.09. This means that A. beer is a normal good. B. beer is an inferior good.
Answer: A
Factors that will tend to lead to higher demand for premium bottled water include all of the following except A. doubts about the benefits of ingredients such as electrolytes which are not found in regular bottled water. B. the popularity of the product with millennials. C. taxes on sodas that cities have been imposing. D. more consumer income and premium bottled water being a normal good.
Answer: A
If consumers believe the price of iPads will decrease in the future, this will cause the demand for iPads to decrease now. A. True B. False
Answer: A
If the cross-price elasticity of demand for computers and software is negative, this means the two goods are A. complements. B. inferior. C. normal. D. substitutes.
Answer: A
Refer to Figure 3-5. At equilibrium, the quantity sold A. is 4 units. B. is 6 units. C. is 2 units. D. is 8 units.
Answer: A
Studies have shown that drinking one glass of red wine per day may help prevent heart disease. Assume this is true, and favorable weather has increased the grape harvest of California vineyards. In the market for red wine, these two developments would A. increase demand and increase supply, resulting in an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of red wine. B. increase demand and increase supply, resulting in an increase in both the equilibrium price and the equilibrium quantity of red wine. C. increase demand and increase supply, resulting in an increase in the equilibrium price and an uncertain effect on the equilibrium quantity of red wine. D. increase demand and decrease supply, resulting in an increase in the equilibrium quantity and a decrease in the equilibrium price of red wine.
Answer: A
Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues. Which of the following best explains this? A. The demand for tomatoes is price inelastic. B. The decrease in supply led to huge price increases. C. The cross-price elasticity between tomatoes and most other substitute vegetables is very low. D. Tomatoes are necessities.
Answer: A
Suppose a negative technological change in the production of disease-resistant wheat caused the price of wheat to rise. Holding everything else constant, how would this affect the market for corn (a substitute for wheat)? A. The demand for corn would increase and the equilibrium price of corn would increase. B. The demand for corn would increase and the equilibrium price of corn would decrease. C. The supply of corn would decrease and the equilibrium price of corn would increase. D. The demand for corn would decrease because consumers could afford to buy less wheat and corn.
Answer: A
Which of the following would shift the supply curve for MP3 players to the left? A. an increase in the price of an input used to produce MP3 players B. a decrease in consumer tastes for MP3 players C. an increase in the number of firms that produce MP3 players D. an increase in the productivity of the workers who produce MP3 players
Answer: A
With the increased usage of cell phone services, what has happened to the price elasticity of demand for land-line telephone services? A. It has become more price elastic. B. It has become more price inelastic.
Answer: A
Figure 3-4Refer to Figure 3-4. At a price of $10, how many units will be sold? A. 800 B. 200 C. 600 D. 400
Answer: B
In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the United States? A. The demand curve shifted to the left. B. The supply curve shifted to the left. C. The supply curve shifted to the right. D. The demand curve shifted to the right.
Answer: B
Refer to Figure 3-5. At a price of $5, A. there would be a shortage of 8 units. B. there would be a shortage of 4 units. C. there would be a surplus of 0 units. D. there would be a surplus of 8 units.
Answer: B
Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for women's clothing. Which panel best describes what happens in this market when the wages of seamstresses rise? A. Panel (a) B. Panel (b) C. Panel (c) D. Panel (d)
Answer: B
Suppose a decrease in the supply of wheat results in an increase in revenue. This indicates that [HINT: First figure out the effect of a supply decrease on the price of wheat and then find out the elasticity] A. the decrease in quantity sold is proportionately larger than the resulting change in price. B. the resulting increase in price is proportionately greater than decrease in quantity sold.
Answer: B
The popularity of digital cameras has enticed large discount stores like Walmart and Costco to offer digital photo printing services. How does the offering of the printing service by Walmart and Costco affect the digital photo printing market? A. The demand curve for digital photo printing services shifts to the left. B. The supply curve for digital photo printing services shifts to the right. C. The demand curve for digital photo printing services shifts to the right. D. The supply curve for digital photo printing services shifts to the left.
Answer: B
Let D = demand, S = supply, P = equilibrium price, and Q = equilibrium quantity. What happens in the market for electric vehicles if the government offers incentives to manufacturers to produce more electric vehicles? A. D and S increase, P and Q decrease B. D no change, S increases, P decreases, Q decreases C. S increases, D no change, P decreases, Q increases D. D increases, S no change, P and Q increase
Answer: C
Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil. What does this indicate about the long-run price elasticity of supply for oil? A. The elasticity coefficient approaches 0 in the long run as supplies are depleted. B. The elasticity coefficient is likely to be lower in the long run than in the short run. C. The elasticity coefficient is likely to be higher in the long run than in the short run.
Answer: C
Refer to Figure 6-10. A perfectly elastic supply curve is shown in A. Panel A. B. Panel B. C. Panel C. D. Panel D.
Answer: C
Suppose the cost of growing organic corn has risen at the same time as consumer preference for organic corn has fallen. In the market for organic corn, this would be represented by the equilibrium price ________ and the equilibrium quantity ________. A. increasing; increasing or decreasing B. increasing or decreasing; increasing C. increasing or decreasing; decreasing D. decreasing; increasing or decreasing
Answer: C
Tom Searchinger, a senior attorney at the Environmental Defense Fund, observed that generous farm subsidies have encouraged farmers to produce more corn and more wheat. How does this affect the market for fertilizer? A. The demand for fertilizer decreases. B. The supply of fertilizer decreases. C. The demand for fertilizer increases. D. The supply of fertilizer increases.
Answer: C
When Nablom's Bakery raised the price of its breads by 10 percent, the quantity demanded fell by 15 percent. What was the effect on sales revenue? A. Sales revenue increased. B. It cannot be determined without information on prices. C. Sales revenue decreased. D. Sales revenue remained unchanged.
Answer: C
Which of the following would cause an increase in the supply of peanut butter? A. an increase the price of a product that producers sell instead of peanut butter B. a decrease in the price of grape jelly (assuming that peanut butter and grape jelly are complements) C. an increase in the number of firms that produce peanut butter D. an increase in the price of peanut butter
Answer: C
The price elasticity of demand for Stork ice cream is -4. Suppose you're told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded? A. 40 percent B. 25 percent C. 2.5 percent D. 0.4 percent
Answer: C 10 / -4 = 2.5
"Because chips and salsa are complements, an increase in the price of chips will cause the demand for salsa to decrease. This initial shift in demand for chips results in a higher price for chips; this higher price will cause the demand curve for chips to shift to the right." Which of the following correctly comments on this statement? A. The statement will be true if consumer tastes for chips and salsa do not change. B. The statement is false because one cannot assume that chips and salsa are complements for all consumers. C. The statement is false because salsa is an inferior good; chips are normal goods. D. The statement is false because a change in the price of chips would not change the demand for chips.
Answer: D
If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, demand for using the toll road must be A. elastic. B. unit elastic. C. perfectly elastic. D. inelastic.
Answer: D
Jenna runs a small boutique in Capitola. She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more. On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers? A. The price elasticity coefficient is 0. B. It is perfectly inelastic. C. It is elastic. D. It is perfectly elastic.
Answer: D
Most people buy salt infrequently and in small quantities. Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded. Therefore A. salt is a normal good. B. the demand for salt will be perfectly inelastic. C. the price elasticity of demand for salt is greater than 1 (in absolute value). D. the demand for salt is relatively inelastic.
Answer: D
Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterize the product. A. 50%; The product is inelastic. B. 2; The product is elastic. C. 0.2; The product is inelastic. D. 0.5; The product is inelastic.
Answer: D
Suppose that McDonald's successfully implements self-serve kiosks in their restaurants, which allows the company to reduce the number of employees at each location. All else equal, this technological improvement would A. shift the demand curve for its products to the left. B. shift the supply curve for its products to the left. C. shift the demand curve for its products to the right. D. shift the supply curve for its products to the right.
Answer: D
The cost of producing cigarettes in the United States has increased and at the same time, more and more Americans are choosing to not smoke cigarettes. Which of the following best explains the effect of these events in the cigarette market? A. Both the supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price. B. The supply curve has shifted to the right and the demand curve has shifted to the left. As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price. C. The supply curve has shifted to the right and the demand curve has shifted to the left. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity. D. Both the supply and demand curves have shifted to the left. As a result, there has been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price.
Answer: D
Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are A. complements. B. both inferior goods. C. both luxury goods. D. substitutes.
Answer: D
In 2016, Philadelphia imposed a tax of 1.5 cents per ounce on sweetened beverages, and PepsiCo indicated that its sales in Philadelphia fell by 40 percent after the tax took effect. If the price of PepsiCo's sweetened beverages in Philadelphia increased by 32 percent following the implementation of the tax, then demand for sweetened beverages in Philadelphia would be A. elastic. B. inelastic. C. unit elastic. D. perfectly inelastic.
Answer:A
Refer to Figure 6-1. A perfectly inelastic demand curve is shown in A. Panel A. B. Panel B. C. Panel C. D. Panel D.
Answer:A
The demand for all carbonated beverages as a whole is likely to be ________ the demand for Dr. Pepper. A. less elastic than B. more elastic than C. perfectly elastic compared to
Answer:A
If the demand for a life-saving drug was perfectly inelastic and the price doubled, the quantity demanded would A. also double. B. remain constant. C. be cut in half. D. decrease by 50%.
Answer:B
Seth is a competitive body builder. He says he has to have his 12-oz package of protein powder to "feed his muscles" every day. On the basis of this information, what can you conclude about his price elasticity of demand for protein powder? A. It is perfectly elastic. B. It is elastic. C. It is perfectly inelastic.
Answer:C
Perfectly inelastic demand is represented by a demand curve which is ________, and relatively inelastic demand is represented by a demand curve which is ________. A. upward sloping; horizontal B. downward sloping; vertical C. horizontal; downward sloping D. vertical; downward sloping
Answer:D