Economics Chapter 4, 5, 6 – Flashcards
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the interaction of supply and demand
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What determines the price and the quantity produced of most goods?
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four
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When movie rentals were $2.95, Sara rented ten movies a month. The price of a rental increased by fifty cents and Sara decided to rent two fewer movies a month. When the price increased by one more dollar, Sarah decided to cut the number of movies she rented in half. What is her quantity demanded by month at the current price?
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demand schedule
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What kind of table lists the quantity of a good that a person will buy at different prices?
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when a good's price is lower, people will buy more of it
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What is a basic principle of the law of demand?
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demand
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When a consumer is able and willing to buy a good or service, he or she creates which of the following?
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she will buy 80 pencils at 15 cents apiece.
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Jasmine is willing to buy 40 pencils at 25 cents apiece. When the price is ten cents apiece, she is willing to buy 100 pencils. Which of the following statements could be true about Jasmine's demand for pencils?
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market
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What kind of system is the United States economy based on?
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a market demand schedule
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What shows the quantities of products demanded at each price by all consumers in a market?
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if the price is exposed to rise, current demand will rise
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How is future price related to current demand?
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a change in demand at every price
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A shift in the demand curve means which of the following?
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it buys less
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When prices rise, which of the following happens to income?
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decrease
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Alex receives a raise at work and continues to work the same number of hours each week. His demand for $3 tshirts, which he considers an inferior good, will
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He moves from a desert community to a rainy city by the ocean.
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Which of these events could permanently shift a individual's demand curve for umbrellas to the right?
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the quantity demanded of movie tickets will decrease
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The price of movie tickets in a town has risen from $7 to $9. What is the most likely effect of the change in price?
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a rise in the demand for shelter
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What kind of changes would be expected in the demand of a country that has a growing population?
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it takes only prices into account
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Ceteris paribus, or "all other things held constant," is an assumption that has which of the following effects on a demand schedule?
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A star basketball layer interests thousands of people in professional sports for the first time
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Which of the following events could cause the demand curve for sports magazines to shift to the right?
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goods for which the demand falls hen income rises
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What are inferior goods?
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demand was raised for different goods with each age the baby boomers reached
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How did the existence of the baby boom generation change demand in the United States?
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if the price is expected to drop, current demand will fall
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How is the current demand for a good related to its future price?
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he bout 10 bottle a month at $1.00 and 8 bottles a month at $1.50
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Will, a sprinter on the track team, has inelastic demand for sports drinks. The local store has raised the price of a sports drink from $1.00 to $1.50. Which of the following could describe Will's response to the price change?
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inelastic
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What term describes demand with an elasticity of less than 1?
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elasticity of demand
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What determines how a change in prices will affect total revenue for a company?
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pencils
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Which of the following goods would be likely to be bought in the same quantity even if it doubled in price?
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the amount a company receives for selling its goods
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What is a company's total revenue?
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a price increase does not have a significant impact on buying habits
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What does it mean when the demand for a product is inelastic?
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the percentage change in quantity demanded is exactly equal to the percentage change in price
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What does unitary elastic demand mean?
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possibly gain or lose revenue
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Demand for movie rentals is highly elastic. A video store that raises the price of a rental will
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passenger airplanes
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Which of these is an example of a good with elastic supply?
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time
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What factor has the greatest influence on elasticity and inelasticity of supply?
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A sandwich shop increases the number of sandwiches they supply every day when the price is increased.
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Which of the following is an example of a good with an inelastic supply?
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Battery manufacturers raise the price of eight AA batteries from $3.50 to $3.95 a set.
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Which of these events would indicate a movement along a supply curve for batteries?
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125,000
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A shoe factory has an elasticity of supply of .5 as the price of shoes rises from $50 to $75. If the factory produced 100,000 shoes at a market price of $50, how many will be produced at the new price?
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producers will not change their quantity supplied by much if the market price doubles.
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If the supply of a good is inelastic,
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equal to
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Complete the following sentence: At the most profitable level of production, a firm's marginal cost will be _____ the market price.
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$2
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An entrepreneur knits sweaters for sale. The entrepreneur has fixed costs of $100. When he makes 10 sweaters in one month, he must spend $15 on wool. To make eleven sweaters in one month, he must spend $17 on wool. If he has no other costs, what is the marginal cost of the eleventh sweater?
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ticket-takers' salaries
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What is an example of a variable cost in a major league baseball franchise?
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It becomes practical to produce more goods.
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When the selling price of a good goes up, what is the relationship to the quantity supplied?
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decreasing marginal returns.
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A baker calculates that by spending $16 on labor and materials, she can bake 10 cakes a day. $24 will allow her to bake 12 cakes, while $36 spent on labor and materials produces 14 cakes. In terms of capital and labor, the baker has
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rent
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Which of the following is a fixed cost for a store?
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store the goods until the price rises
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What do sellers do if they expect the price of goods they have for sale to increase dramatically in the near future?
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They cause prices to rise.
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What is the effect of import restrictions on prices?
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the use of e-mail to replace slower surface mail
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Which of the following is an example of lower production costs brought about by the use of technology?
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subsidies
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Which of the following is an example of government influence on supply?
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rent control
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The price ceiling that was used to control the price of housing in New York City and other cities was called which of the following?
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equilibrium
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When buyers will purchase exactly as much as sellers are willing to sell, what is the condition that has been reached?
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minimum wage
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What is the name of the smallest amount that can legally be paid to most workers for an hour of work?
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those that are essential but too expensive for some consumers
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On which kinds of goods do governments generally place price ceilings?
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price ceiling.
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Rent control is a type of
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Quantity supplied will exceed quantity demanded, so the price will drop.
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What happens to a market in equilibrium when there is an increase in supply?
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Demand increases so quickly and unexpectedly that time is needed for the quantity supplied and price to increase to reach a new equilibrium point
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Why do fads often lead to shortages, at least in the short term?
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more MP3 players will be sold at a lower price.
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Technological process has reduced the cost of manufacturing MP3 players. If demand is unchanged, The correct answer is "more MP3 players will be sold at a lower price." But it is important to understand why this is the case. If demand is unchanged why would a seller lower his price? He is not just trying to be nice. If demand were dropping it makes sense tht he might need to lower prices but its not. Demand remains the same. So why would he drop prices. Think like an economist.
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Elena misses two days of work at the supermarket to visit several different apartments available for rent.y
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Elena is looking for an apartment. Which of the following is an example of her search costs?
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more bicycles sold, but at a higher price.
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In response to rising car traffic, demand for bicycles has increased. The new equilibrium point will show
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either the good remains unsold or the price drops
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What happens when the supply of a nonperishable good is greater than the consumer wants to buy?
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the quantity supplied of a good is greater than the quantity demanded of that good.
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A shortage will develop when
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rationing
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Which of these is most likely to lead directly to a black market?
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when consumers do not have enough information to make good choices
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Which of the following is a situation that makes the market behave inefficiently?
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resources are used in the most valuable and productive way according to the needs of consumers and producers.
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In a free market, prices lead to an efficient allocation of resources. In other words,
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to guarantee each civilian a minimum standard of living in wartime
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Why did the U.S. government use rationing for some foods and consumer goods during World War II?
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rationing
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What is it called when the government uses some tool other than money to allocate goods?
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in an attempt to create a society in which everyone was equal
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Why did Communist governments use a command economic system for many years?
