Economics Test 1 – Flashcards
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Other things being equal, the law of demand suggests that as:
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The price of iPads decreases, the quantity demanded will increase.
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Which of the following would cause a shift in coffee demand for D1 to D2 (rightward shift)?
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An increase in consumer incomes.
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On a price vs quantity demanded graph, an increase in the price would cause a:
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Movement along the demand curve.
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Which statement is true about supply?
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To entice producers to offer more of a good on the market for sale, price must rise.
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Which of the following would cause the supply of corn to shift rightward?
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The development of a more effective insecticide against corn root worm.
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Which of the following would cause the supply of corn to shift leftward?
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An increase in the price of soybeans.
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How do you find equilibrium price and quantity on a price vs quantity demanded graph?
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Equilibrium is found where the supply and demand curves intersect.
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If the price were $2 per gallon, then there would be a:
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Surplus of 10 million gallons.
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If the market price is above the equilibrium price:
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A surplus will occur and producers will produce less and lower prices.
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Select the graph that best shows the changes in demand and supply i the market specified in the following situation: In the market for beef, if a new diet fad favoring beef consumption becomes hugely popular, while cattle producers see steeply rising costs of cattle feed.
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Graph D. (The supply curve will shift towards the left while the demand curve shifts towards the right)
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Select the graph that best shows the changes in demand and supply i the market specified in the following situation: In the market for music CDs sold in stores, if more consumers switch to music-downloads from the Internet, and the cost of making music CDs decreases because of technological improvement in production.
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Graph C. (The supply curve will shift towards the right while the demand curve shifts towards the left)
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An increase in demand for oil along with a simultaneous increase in supply of oil will:
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Increase quantity, but whether it increases price depends on how much each curve shifts.
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In a competitive market, for a price floor to be effective and alter the market situation, it must be set:
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Above $15. (A price floor needs to be set at the equilibrium price or above)
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In a competitive market, a price ceiling of $25 per unit will result in:
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The market stays at equilibrium price of $15. (When the price ceiling is above the equilibrium price, the price will just stay at equilibrium)
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If the government imposed a price ceiling of $15, then buyers will be intending to buy _, but they will be able to legally buy _.
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36 units; 24 units. (Find where the price level intersects the supply and demand curves. The point at which the price level intersects with the supply curve will tell you how many objects people can buy legally. The point at which the price level intersects with the demand curve will tell you how many objects people intend on buying)
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The economizing problem is:
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The need to make choices because economic wants exceed economic means.
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Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This example illustrates:
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Opportunity costs.
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Which of the following is associated with macroeconomics?
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An empirical investigation of the general price level and unemployment rates since 1990.
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Ben says that "an increase in the tax on beer will raise its price." Holly argues that "taxes would be increased on beer because college students drink too much." We can conclude that:
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Holly's statement is normative, but Ben's is positive. (Normative statements are bias while positive statements are factual)
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Increasing the share of your income that you save is good for you. Therefore it would be good for the whole economy if everyone saved more. This exemplifies the:
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Fallacy of composition.
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In constructing models, economists:
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Make simplifying assumptions.
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Suppose an economist says that "other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:
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All factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.
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Which of the following lists includes only capital resources (and therefore no labor or land resources)?
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Autos owned by a car rental firm; computers at the car rental agency; the vans that shuttle rental customers to and from the airport.
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A production possibilities curve shows:
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The maximum amounts of two goods that can be produced, assuming the full use of available resources.
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Bicycles (14, 12, 9, 5)
Computers (0, 2, 4, 6)
If society is currently producing 9 units of bicycles and 4 units of computer and it now decides to increase computer out to 6, the cost:
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Will be 4 units of bicycles.
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The combination of computers and bicycles shown by point G is (outside the curve):
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Unattainable given currently available resources and technology. (A point on the outside of the curve is not attainable)
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The combination of computers and bicycles show by point F (inside the curve):
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Is attainable but implies that the economy is not using all its resources. (A point on the inside of the curve is attainable but not efficient)
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Duckistan Production Possibilities
Civilians Goods (20, 18, 14, 8, 0)
Military Goods (0, 1, 2, 3, 4)
Herbania Production Possibilities
Civilian Goods (40, 36, 26, 14, 0)
Military Goods (0, 1, 2, 3, 4)
Refer to the tables. Opportunity costs are:
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Increasing in both Duckistan and Herbania. (For every military good, it costs a certain number of civilian goods)
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Two linear production possibilities curve for countries Alpha and Beta. We can conclude that:
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The opportunity cost of shelter is greater in Alpha than it is in Beta. (The steeper the line, the greater the "x" opportunity costs)
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Which of the following will not produce an outward shift of the production possibilities curve?
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The reduction of unemployment.
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A fundamental difference between the command system and laissez-faire capitalism is that in command systems:
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The division of output is decided by central planning rather than by individuals operating freely through markets.
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Examples of command economies are:
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Cuba and North Korea.
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Which of the following is not a typical characteristic of a market system?
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Government ownership of most property resources.
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Competition means that:
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There are independently acting buyers and sellers in each market.
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In a competitive market economy, firms select the least-cost production technique because:
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To do so will maximize the firms' profits.
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In view of the indicated resource prices, the economically most efficient production technique(s) is (are) technique(s):
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#2 and #4. (Multiply across to find the cost for each resource. Then add up the total resources. The smallest mer is the most efficient way of production)
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Two major virtues of the market system are that it:
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Allocates resources efficiently and allows economic freedom.
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The invisible hand promotes society's interest because:
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Individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase.
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Which of the following best illustrates the circular flow model in action?
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All of these answers illustrate the workings of the circular flow model. Bobbie goes to work and builds cars, and uses the income she receives to buy food at the grocery store. Evan buys a new couch; the owner of the furniture store uses some of the money from the sale to pay her supplier, and uses the rest to take her family out to dinner. Boeing experiences a surge in orders for new airplanes, prompting the company to hire more workers.
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Which of the following statements is true about rise management in the market systems versus command systems?
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Market systems manage risk better because entrepreneurs taking risks bear the costs of poor decisions, where as command systems government decision makers don't bear those costs.
