PS4 Econ 202 Wiggins
On most days, the price of a rose is $1, and 8,000 roses are purchased. On Valentine's Day, the price of a rose jumps to $2, and 30,000 roses are purchased. we do have constant supply. What is price elasticity of supply?
1.74
In many cities, firms that own office buildings can renovate them for use as residential apartments. According to a news story, in many cities "residential rents are surpassing office rents." Source: Eliot Brown, "Developers Turn Former Office Buildings Into High-End Apartments," Wall Street Journal, May 7, 2014. The response to an increase in residential rents would be
A decrease in the supply of office space, shifting it to the left.
From the list below, select the variable that will cause the supply curve to shift: A. The cost of raw materials B. Consumer income C. Population and demographics D. Prices of related goods
A. The cost of raw materials
In late 2014, oil prices were falling but some energy traders were convinced that oil prices would begin to rise within a few months. According to a news story, these expectations were causing some "traders to put oil in storage while they wait for prices to rise." Source: Nicole Friedman, "Saudi Arabia's Surprise Move Spurs Quirk for U.S. Oil Futures," Wall Street Journal, November 4, 2014. Holding some oil in storage rather than selling it would A. decrease the supply of oil, shifting it to the left. B. increase the supply of oil, shifting it to the left. C. decrease the supply of oil, shifting it to the right. D. increase the supply of oil, shifting it to the right.
A. decrease the supply of oil, shifting it to the left.
A production possibilities frontier: A. shows the maximum attainable combinations of two goods that may be produced with available resources. B. shows how unlimited wants exceed the limited resources available to fulfill those wants. C. shows the act of buying and selling. D. shows the market for a good or service. E. shows how participants in the market are linked.
A. shows the maximum attainable combinations of two goods that may be produced with available resources.
Consider the supply of zinc. What would make the supply of zinc more elastic? The supply of zinc would become more elastic if A. the time horizon becomes longer. B. it becomes a larger portion of a consumer's budget. C. the definition of the market becomes narrower. D. more substitutes were available. E. it were more of a luxury.
A. the time horizon becomes longer.
Which of the following illustrates the law of supply? A. An increase in the number of firms in an industry causes a shift of the supply curve. B. An increase in price causes an increase in the quantity supplied, and a decrease in price causes a decrease in the quantity supplied. C. A change in price causes a shift of the supply curve. D. All of the above illustrate the law of supply.
B. An increase in price causes an increase in the quantity supplied, and a decrease in price causes a decrease in the quantity supplied.
Choco Fantasy is a firm that produces both dark chocolates as well as liquor chocolates. It can produce 10,000 bars of dark chocolate per month if all its resources are used to produce only this variety. Similarly, using all its resources in the production of liquor chocolates, the firm can produce 8,000 bars per month. However, during a given month, the firm produces both varieties. Which of the following, if true, would suggest that the firm is operating on its PPF? A. In an attempt to cut costs, the company is planning to fire its unproductive resources. B. Even though the demand for both liquor and dark chocolates has increased, the company can increase the production of only one variety. .C. The opportunity cost of shifting resources from the production of liquor chocolates to dark chocolates is marginal. D. Medical reports earlier this year indicated that higher chocolate consumption increases the risk of heart attack. E. Most domestic consumers prefer the better quality Swiss chocolates imported by the country.
B. Even though the demand for both liquor and dark chocolates has increased, the company can increase the production of only one variety.
What does increasing marginal opportunity costs mean? A. Increasing the production of a good requires smaller and smaller decreases in the production of another good. B. Increasing the production of a good requires larger and larger decreases in the production of another good. C. Increasing the production of a good requires decreases in the production of another good. D. Production is not occurring on the production possibilities frontier. E. The economy is unable to produce increasing quantities of goods and services.
B. Increasing the production of a good requires larger and larger decreases in the production of another good.
Which of the following is the textbook's definition of a supply schedule? A. the quantity of a good or service that a firm is willing to supply at a particular price B. a table that shows the relationship between the price of a product and the quantity of the product supplied C. a curve that shows the relationship between the price of a product and the quantity of the product demanded D. None of the above.
B. a table that shows the relationship between the price of a product and the quantity of the product supplied
The production possibilities frontier will shift outward A. if resources are not used in production. B. if technological advances occur C. if production occurs outside the production possibilities frontier. D. if resources are not used to produce capital goods E. if resources are used to produce consumption goods.
B. if technological advances occur
Which of the following is the textbook's definition of a supply curve? A. the quantity of a good or service that a firm is willing to supply at a particular price B. a table that shows the relationship between the price of a product and the quantity of the product supplied C. a curve that shows the relationship between the price of a product and the quantity of the product supplied D. None of the above.
C. a curve that shows the relationship between the price of a product and the quantity of the product supplied
Like many other cities, Denver experienced a sharp decline in construction of new houses in the years following 2006. Many carpenters, roofers, and other skilled workers left the area or found jobs in other industries. In addition, builders stopped buying and preparing home lots for construction. According to an article in the Wall Street Journal, by 2014, as consumers increased their demand for new homes in Denver, "New-home prices have surged over the past two years ... amid a shortage of home lots and skilled construction workers." Source: Kris Hudson, "Labor Shortage Besets Home Builders," Wall Street Journal, May 1, 2014. In the future, the price increases of new houses in Denver can be expected to be A. smaller because supply is less elastic over time. B. larger because supply is more elastic over time. C. smaller because supply is more elastic over time. D. larger because supply is less elastic over time.
C. smaller because supply is more elastic over time.
We can show economic efficiency: A. with points on and outside the production possibilities frontier. B. with points inside the production possibilities frontier. C. with points on the production possibilities frontier. D. with points inside and on the production possibilities frontier. E. with points outside the production possibilities frontier.
C. with points on the production possibilities frontier.
According to a news story about the International Energy Agency, the agency forecast that "the current slide in [oil] prices won't [reduce] global supply." Source: Sarah Kent, "Plunging Oil Prices Won't Dent Supply in Short Term," Wall Street Journal, December 12, 2014. Would a decline in oil prices ever cause a reduction in the supply of oil? A. No, the supply of oil is fixed. B. Yes, a decline in oil prices would reduce the supply of oil, but not the quantity of oil supplied. C. No, a decline in oil prices would reduce the quantity of oil supplied, not the supply of oil. D. Yes, a decline in oil prices would reduce both the quantity of oil supplied and the supply of oil.
C. No, a decline in oil prices would reduce the quantity of oil supplied, not the supply of oil.
On the diagram to the right, movement along the curve from points A to B to C illustrates A. Constant marginal opportunity costs. B. decreasing marginal opportunity costs. C. increasing marginal opportunity costs. D. reflexive marginal opportunity costs.
C. increasing marginal opportunity costs.
A production possibilities frontier (PPF) is A. a curve that shows the potential productive capabilities of the frontier (defined as the area outside of cities) of a developing economy. B. a curve showing the generally attainable combinations of two products that may be produced with all planned or potential, yet undeveloped technology. C. a curve that illustrates the demand of two goods for the average consumer. D. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.
D. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.
[Related to the Making the Connection] An article in the Wall Street Journal notes that although U.S. oil production has increased rapidly in recent years, the increase has still amounted to only 5 percent of world production. Still, that increase has been "enough to help trigger a price collapse." Source: Georgi Kantchev and Bill Spindle, "Shale-Oil Producers Ready to Raise Output," Wall Street Journal, May 13, 2015. A small increase in supply can lead to a large decline in equilibrium price when A. demand is relatively elastic. B. demand is perfectly elastic. C. supply is perfectly elastic. D. demand is relatively inelastic.
D. demand is relatively inelastic.
Lawrence Summers served as secretary of the treasury in the Clinton administration and as director of National Economic Council in the Obama administration. He has been quoted as giving the following moral defense of the economic approach. "There is nothing morally unattractive about saying: We need to analyze which way of spending money on health care will produce more benefit and which less, and using our money as efficiently as we can. I don't think there is anything immoral about seeking to achieve environmental benefits at the lowest possible costs." Source: David Wessel, "Precepts from Professor Summers," Wall Street Journal, October 17, 2002. It would be more moral to reduce pollution, A. taking the cost into account because the total cost of reducing pollution is likely enormous. B. taking the cost into account because reducing pollution often reduces economic growth. C. not taking the cost into account because pollution reduction is typically associated with large benefits. D. taking the cost into account because money spent on pollution reduction is not available for other worthy activities. E. not taking the cost into account because pollution is potentially harmful to our health.
D. taking the cost into account because money spent on pollution reduction is not available for other worthy activities.
According to the law of supply, A. there is a positive relationship between price and quantity supplied. B. as the price of a product increases, firms will supply less of it to the market. C. as the price of a product increases, firms will supply more of it to the market. D. A and C only
D. A and C only
What are the implications of this idea for the shape of the production possibilities frontier? A. The production possibilities frontier will be a straight line. B. The production possibilities frontier will have a positive slope. C. The production possibilities frontier will be bowed inward. D. The production possibilities frontier will have a negative slope. E. The production possibilities frontier will be bowed outward.
E. The production possibilities frontier will be bowed outward.
We can show economic inefficiency: A. with points on the production possibilities frontier. B. with points on and outside the production possibilities frontier. C. with points outside the production possibilities frontier. D. with points inside and on the production possibilities frontier. E. with points inside the production possibilities frontier.
E. with points inside the production possibilities frontier.
Over the past 30 years, the price of oil has been relatively unstable, fluctuating between $11.00 and well over $100 per barrel. Which of the following potentially contributes to oil-price instability? Oil prices are relatively unstable because A. the market for oil is relatively competitive. B. the income elasticity of demand for oil is negative. C. the demand for oil is elastic. D. OPEC has been successful in controlling the quantity of oil its members supply. E. the supply of oil is inelastic.
E. the supply of oil is inelastic.
Moving along segment F on the supply curve graph corresponds to moving along which part of the PPF?
Segment A
The price elasticity of supply when supply is perfectly elastic is ________________________
infinity
