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https://www.eztestonline.com/842175/14546205145512900962.tp4?REQUEST=SHOWmedia&media=image049.png Refer to the diagram. Technological advance that is useful in producing consumer goods but not in producing capital goods is shown by the shift of the production possibilities curve from AB to:
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AF.
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https://www.eztestonline.com/842175/14546205145512900962.tp4?REQUEST=SHOWmedia&media=1image025.png Refer to the diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production, including external costs. Assume that the number of people affected by these external costs is large. If the government wishes to establish an optimal allocation of resources in this market, it should:
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tax producers so that the market supply curve shifts leftward (upward).
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Assume an economy is incurring unemployment. The effect of resolving this problem will be to:
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move the level of actual output on to the economy's production possibilities curve.
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Sometimes, public goods whose benefits are less than their costs still get produced because:
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The benefits accrue to politically powerful government officials and their constituents
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Producer surplus
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is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.
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In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:
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scarcity and opportunity costs.
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The advent of DVDs has virtually demolished the market for videocassettes. This is an example of:
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creative destruction.
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A normative statement is one that:
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is based on value judgments.
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According to the Coase theorem:
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private individuals can often negotiate their own resolution of externality problems, without the need for government intervention.
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The development of the digital video and camera which replaced film cameras is an example of:
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Creative destruction
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In the dollar-yen foreign exchange market, if Japanese companies sharply increase their importation of U.S. products, then the:
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Supply of yen will increase and the yen will depreciate
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The linear equation for line (1) on the above graph is:
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y = 8 + .5x
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Answer the question on the basis of the following five data sets wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis. Refer to the data sets. The vertical intercept is negative for
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data sets 2 and 4 only.
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Which of the following is one of the simplifying assumptions made in constructing a production possibilities curve?
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Resources are fully employed and are used in least-cost methods of production
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Answer the question on the basis of the data given in the following production possibilities table: Refer to the table. If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be:
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1/3 of a unit of capital goods.
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Answer the question on the basis of the following information for a public good. Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it. These people are the only two members of society. Refer to the data. If this good were a private good instead of a public one, the total quantity demanded at a $3 market price would be:
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4 units.
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By an "increase in demand," economists mean that:
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the quantity demanded at each price in a set of prices is greater.
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When producers (say, of roads) are not able to make all consumers pay for enjoying their product (i.e., the roads), they tend to see a:
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Marginal benefit of production that is too low, and there is a demand-side market failure
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(Advanced analysis) Answer the question on the basis of the following information. The demand for commodity X is represented by the equation P = 10 - 0.2Q and supply by the equation P = 2 + 0.2Q. Refer to the given information. If demand changed from P = 10 - .2Q to P = 7 - .3Q, we can conclude that:
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demand has decreased.
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If an economy is operating inside its production possibilities curve for consumer goods and capital goods, it:
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can produce more of both consumer goods and capital goods by using resources that are currently idle.
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From an economic perspective, when consumers leave a fast-food restaurant because the lines to be served are too long, they have concluded that the:
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Marginal cost of waiting is greater than the marginal benefit of being served
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Asymmetric information in a market transaction occurs when there is unequal knowledge possessed by the:
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Buyer and the seller
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The two basic markets shown by the simple circular flow model are:
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product and resource.
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Specialization—the division of labor—enhances productivity and efficiency by:
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all of the means identified in the other answers.
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If the total costs of producing 1,500 units of output is $15,000 and this output sold to consumers for a total of $16,500, then the firm would earn profits of:
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$1,500
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Which one of the following is a normative economic statement?
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The worsening balance of trade must be corrected if this nation is to remain competitive in the world economy
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Which of the following is a determinant of supply?
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Product taxes and subsidies
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Refer to the diagram. The concave shape of each production possibilities curve indicates that:
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resources are not equally suited for alternative uses.
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The two main characteristics of a public good are:
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nonrivalry and nonexcludability.
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If the price of a product increases:
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Consumer surplus will decrease
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Command systems are also known as:
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communism
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Refer to the diagram. If actual production and consumption occur at Q1:
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an efficiency loss (or deadweight loss) of b + d occurs.
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When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls?
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The substitution effect.
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If a competitive industry is neither expanding nor contracting, we would expect:
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economic profits to be zero.
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(Consider This) Martha's Milkshake Company buys earthquake insurance from the Stable Ground Insurance Company. Based on this purchase, economists would conclude that:
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Martha's has a lower tolerance for earthquake risk than Stable Ground.
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Which of the following factors is a "demand shifter" for new houses?
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The interest rates on mortgage loans
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One consequence of the asymmetric-information problem in the used car market, if left unresolved, is the higher probability of:
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A declining quality of used cars in the market
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The economizing problem is essentially one of deciding how to make the best use of:
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Limited resources to satisfy unlimited economic wants
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Assume that a consumer has a given budget or income of $12, and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. Refer to the information given above. For this consumer, the opportunity cost of buying two bananas is
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1 apple.
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Refer to the four graphs above. Select the graph that best shows the changes in demand and supply in 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
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A market for pollution rights can be expected to:
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Provide potential polluters with a monetary incentive to reduce emissions
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In a market system, the task of assessing and managing the business risk of a firm is taken on by the firm's:
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Entrepreneurs
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Which is most likely to be observed in a community where legal ceilings are imposed on residential rents?
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People moving into the community will have difficulty locating residential space to rent
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In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market.
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product; resource
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Anything that is generally acceptable in trading for goods and services is a:
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Medium of exchange
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Which of the following is the fallacy in the fallacy of composition?
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What is true for the part is necessarily also true for the whole
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Refer to the diagram. The slope of curve ZZ at point C is approximately:
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-22/5.
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All markets involve the following elements, except:
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Face-to-face negotiation
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Which of the following conditions does not need to occur for a market to achieve allocative efficiency?
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The total revenue received by producers equals the total cost of production.
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In response to the financial crisis that began in 2007, the government began to bail out banks deemed "too big to fail." Critics of this action argued that this would create the prospect of future bailouts and encourage banks to be fiscally irresponsible in the future. This illustrates:
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the moral hazard problem.
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A required element for specialization to lead to an increase in the satisfaction of society's wants is:
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Exchange and trade
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If the price of product L increases, the demand curve for close-substitute product J will:
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shift to the right.
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Economic profits in an industry suggest the industry:
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should be larger to better satisfy consumers' desire for the product.
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A nation can produce two products: tanks and autos. The table below is the nation's production possibilities: Given the production possibilities schedule above, a combination of 3 tanks and 350 autos:
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Is attainable but entails some unemployment or inefficient use of society's resources
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The money income of households consists of all the following, except:
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Revenues
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Graphically, if the supply and demand curves are linear, consumer surplus is measured as the triangle:
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under the demand curve and above the actual price.
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Refer to the above graph showing the market for a product. Which of the following could not explain the indicated increase in equilibrium price from P1 to P2?
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An increase in production costs
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When sellers are unable to distinguish "good" buyers from "bad" ones, they face the problem of:
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Adverse selection
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Refer to the budget line shown in the diagram. The absolute value of the slope of the budget line is:
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PC/PD.
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In a market system, a firm's employees are typically shielded from business risk by:
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Wage contracts
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Which of the following do economists consider to be capital?
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A construction crane.
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The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the:
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Guiding function of prices
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Refer to the diagram. The highest price that buyers will be willing and able to pay for 100 units of this product is:
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$60.
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Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact:
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implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.
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A person observes that consumer prices often fall when a nation experiences economic growth. The person then concludes that falling consumer prices leads to economic growth. This would be an example of:
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Confusing correlation and causation
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Variables X and Y in the above table are:
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Positively related
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Private property:
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encourages owners to maintain or improve their property so as to preserve or enhance value.
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The amount of revenues that sellers actually receive over and above the minimum acceptable amount that they are willing to receive for selling a product is called:
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Producer surplus
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Refer to the diagram. Which line(s) show(s) a negative relationship between x and y?
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Both C and E.
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In a command economy like the old Soviet Union, one is able to improve one's lot and get ahead in society largely through:
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Participating in the political hierarchy
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(Advanced analysis) Answer the question on the basis of the following information. The demand for commodity X is represented by the equation P = 100 - 2Q and supply by the equation P = 10 + 4Q. Refer to the given information. The equilibrium quantity is
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15.
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If there is a surplus of a product, its price:
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is above the equilibrium level.
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The table below shows the weekly demand for hamburger in a market where there are just three buyers. Refer to the above table. At a price of $6, the weekly market quantity demanded for hamburger is:
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17
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If price (P) and quantity (Q) are directly related, this means that:
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if P increases, Q will also increase.
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In presenting the idea of a demand curve, economists presume the most important variable in determining the quantity demanded is:
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the price of the product itself.
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Which statement best illustrates the concept of diminishing marginal utility?
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A typical consumer will receive less satisfaction from consuming the fourth hamburger than from the third hamburger in a week
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The supply curve in a market is vertical instead of upsloping whenever:
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Sellers have a fixed quantity of the item for sale
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If the price of Pepsi decreases, other factors constant, then we'd expect to see a consequent shift of the demand curve for:
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Coke to the left
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Economic efficiency is the primary guide in answering which of the fundamental questions in a market economy?
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How is the output to be produced?
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Which of the diagrams illustrates the effect of an increase in automobile worker wages on the market for automobiles?
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D only.
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Which of the following statements about market failure is not true:
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Market failure always results from some government action or policy in a market
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In a market system, as one industry expands while another contracts, resources will flow:
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From one industry due to the changes in resource prices paid by firms
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A government is considering undertaking one or more construction projects. The estimated marginal costs and benefits of each project are given in the table. Refer to the above table and information. What is the total cost and total benefit of projects 1, 2, and 3?
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Total cost is $37 million and total benefit is $41 million
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Property rights are important because they:
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encourage cooperation by improving the chances of mutually agreeable transactions.
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Refer to the diagram. A decrease in demand is depicted by a:
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shift from D2 to D1.
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"Consumer sovereignty" means that:
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buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.
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Refer to the diagram. With MB1 and MC1, society's optimal amount of pollution abatement is:
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Q1
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Assume that a government is considering a new social program and may choose to include in this program any number of four progressively larger projects. The marginal cost and the marginal benefits of each of the four projects are given in the table. Refer to the above table and information. What project should the government select to achieve the maximum net benefit?
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C
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You should decide to go to a movie:
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if the marginal benefit of the movie exceeds its marginal cost.
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The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?
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Price of gasoline cars
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Answer the question on the basis of the following information for four highway programs of increasing scope. All figures are in millions of dollars. On the basis of the data we can say that:
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Program B is the most efficient on economic grounds.
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A nation can produce two products: tanks and autos. The table below is the nation's production possibilities: Refer to the above table. The total opportunity cost of three units of tanks is: 6 units of tanks
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350 units of autos
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If Z is an inferior good, an increase in money income will shift the:
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demand curve for Z to the left.
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The difference between the actual price that a producer receives and the minimum acceptable price the producer is willing to accept is called the producer:
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Surplus
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A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?
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Firms focus attention on prudent risk management, as it is profitable to manage risk.
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Which of the following is not a major category of business structure?
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Public agency
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Refer to the diagram. A price of $20 in this market will result in a:
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shortage of 100 units.
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Insurance policies typically stipulate a deductible amount which the insured must shoulder; this is to address the problem of:
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Moral hazard
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A newspaper reports that the average price of new homes in a certain city had decreased, and the number of new homes sold had also decreased. This situation is probably caused by:
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Declining incomes of people in that city
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The vertical intercept of line (3) on the above graph is:
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16
