Test 1 – Flashcard Answers
Flashcard maker : Brooke Sharp
labor includes physical and mental effort, and land includes natural resources.
True
. Entrepreneurship is the process of combining labor, land, and capital together to produce goods and services.
True
Even intangible goods can be subjected to economic analysis.
True
Even the wealthy individual who decides to donate all of her money to charity faces the constraints of scarcity.
True
Increases in production could enable us to eliminate scarcity.
False
If we had unlimited resources, we would not have to choose among our desires.
True
Scarcity implies that “there’s no such thing as a free lunch.”
True
The actual result of changing behavior following the rule of rational choice will always make people better off.
False
In terms of the rule of rational choice, zero levels of pollution, crime, and safety would be far too costly in terms of what we would have to give up to achieve them.
True
Most choices in economics are all or nothing.
False
Good economic thinking requires thinking about average amounts rather than marginal amounts.
False
Positive incentives are those that either increase benefits or reduce costs, resulting in an increase in the level of the related activity or behavior; negative incentives either reduce benefits or increase costs, resulting in a decrease in the level of the related activity or behavior.
True
The safety issue is generally not whether a product is safe, but rather how much safety consumers want.
True
People can gain by specializing in the production of the good in which they have a comparative advantage.
True
Without the ability to trade, people would not tend to specialize in those areas where they have a comparative advantage.
True
Voluntary trade directly increases wealth by making both parties better off, and it is the prospect of wealth-increasing exchange that leads to productive specialization.
True
Government price controls can short-circuit the market’s information transmission function.
True
When the economy produces too little or too much of something, the government can potentially improve society’s well-being by intervening.
True
Not only does the market determine what goods are going to be produced and in what quantities, but it also determines the distribution of output among members of society.
True
1. Which of the following is part of the economic way of thinking?
a. When an option becomes less costly, individuals will become more likely to choose it.
b. Costs are incurred whenever scarce resources are used to produce goods or services.
c. The value of a good is determined by its cost of production.
d. Both a. and b. are part of the economic way of thinking.
a. When an option becomes less costly, individuals will become more likely to choose it.
b. Costs are incurred whenever scarce resources are used to produce goods or services.
c. The value of a good is determined by its cost of production.
d. Both a. and b. are part of the economic way of thinking.
d. Both a. and b. are part of the economic way of thinking.
Ted has decided to buy a burger and fries at a restaurant but is considering whether to buy a drink as well. If the price of a burger is $2.00, fries are $1.00, drinks are $1.00, and a value meal with all three costs $3.40, the marginal cost to Ted of the drink is
a. $1.00.
b. $0.40.
c. $1.40.
d. $3.40.
e. impossible to determine from the information given.
a. $1.00.
b. $0.40.
c. $1.40.
d. $3.40.
e. impossible to determine from the information given.
b. $0.40.
3. If a country wants to maximize the value of its output, each job should be carried out by the person who
a. has the highest opportunity cost.
b. has a comparative advantage in that activity.
c. can complete the particular job most rapidly.
d. enjoys that job the least.
a. has the highest opportunity cost.
b. has a comparative advantage in that activity.
c. can complete the particular job most rapidly.
d. enjoys that job the least.
b. has a comparative advantage in that activity.
4. Who would be most likely to drop out of college before graduation?
a. An economics major who wishes to go to graduate school.
b. A math major with a B+ average.
c. A chemistry major who has just been reading about the terrific jobs available for those with chemistry degrees.
d. A star baseball player who has just received a multimillion-dollar major league contract offer after his junior year.
a. An economics major who wishes to go to graduate school.
b. A math major with a B+ average.
c. A chemistry major who has just been reading about the terrific jobs available for those with chemistry degrees.
d. A star baseball player who has just received a multimillion-dollar major league contract offer after his junior year.
d. A star baseball player who has just received a multimillion-dollar major league contract offer after his junior year.
5. “If I hadn’t been set up on this blind date tonight, I would have saved $50 and spent the evening watching TV.” The opportunity cost of the date is
a. $50.
b. $50, plus the cost to you of giving up a night of TV.
c. smaller, the more you enjoy the date.
d. higher, the more you like that night’s TV shows.
e. described by both b. and d.
a. $50.
b. $50, plus the cost to you of giving up a night of TV.
c. smaller, the more you enjoy the date.
d. higher, the more you like that night’s TV shows.
e. described by both b. and d.
e. described by both b. and d.
6. Say you had an 8 A.M. economics class, but you would still come to campus at the same time even if you skipped your economics class. The cost of coming to the economics class would include
a. the value of the time it took to drive to campus.
b. the cost of the gasoline it took to get to campus.
c. the cost of insuring the car for that day.
d. both a and b.
e. none of the above.
a. the value of the time it took to drive to campus.
b. the cost of the gasoline it took to get to campus.
c. the cost of insuring the car for that day.
d. both a and b.
e. none of the above.
e. none of the above.
Which of the following would be likely to raise your opportunity cost of attending a big basketball game this Sunday night?
a. A friend calls you up and offers you free tickets to a concert by one of your favorite bands on Sunday night.
b. Your employer offers you double your usual wage to work this Sunday night.
c. Late Friday afternoon, your physics professor makes a surprise announcement that there will be a major exam on Monday morning.
d. All of the above.
a. A friend calls you up and offers you free tickets to a concert by one of your favorite bands on Sunday night.
b. Your employer offers you double your usual wage to work this Sunday night.
c. Late Friday afternoon, your physics professor makes a surprise announcement that there will be a major exam on Monday morning.
d. All of the above.
d. All of the above.
Which of the following demonstrates marginal thinking?
a. deciding to never eat meat
b. deciding to spend one more hour studying economics tonight because you think the improvement on your next test will be large enough to make it worthwhile to you
c. working out an extra hour per week
d. both b. and c.
a. deciding to never eat meat
b. deciding to spend one more hour studying economics tonight because you think the improvement on your next test will be large enough to make it worthwhile to you
c. working out an extra hour per week
d. both b. and c.
d. both b. and c.
9. If resources and goods are free to move across states, and if Florida producers choose to specialize in growing grapefruit
and Georgia producers choose to specialize in growing peaches, then we could reasonably conclude that
a. Georgia has a comparative advantage in producing peaches.
b. Florida has a comparative advantage in producing peaches.
c. the opportunity cost of growing peaches is lower in Georgia than in Florida.
d. the opportunity cost of growing grapefruit is lower in Florida than in Georgia.
e. all of the above except b are true.
and Georgia producers choose to specialize in growing peaches, then we could reasonably conclude that
a. Georgia has a comparative advantage in producing peaches.
b. Florida has a comparative advantage in producing peaches.
c. the opportunity cost of growing peaches is lower in Georgia than in Florida.
d. the opportunity cost of growing grapefruit is lower in Florida than in Georgia.
e. all of the above except b are true.
e. all of the above except b are true.
If a driver who had no change and whose cell phone battery was dead got stranded near a pay phone and chose to buy a quarter and a dime from a passerby for a dollar bill,
a. the passerby was made better off and the driver was made worse off by the transaction.
b. both the passerby and the driver were made better off by the transaction.
c. the transaction made the driver worse off by 65 cents.
d. both a and c are true.
a. the passerby was made better off and the driver was made worse off by the transaction.
b. both the passerby and the driver were made better off by the transaction.
c. the transaction made the driver worse off by 65 cents.
d. both a and c are true.
b. both the passerby and the driver were made better off by the transaction.
Which of the following is not true?
a. Voluntary exchange is expected to be advantageous to both parties to the exchange.
b. What one trader gains from a trade, the other must lose.
c. If one party to a potential voluntary trade decides it does not advance his interests, he can veto the potential trade.
d. The expectation of gain motivates people to engage in trade.
a. Voluntary exchange is expected to be advantageous to both parties to the exchange.
b. What one trader gains from a trade, the other must lose.
c. If one party to a potential voluntary trade decides it does not advance his interests, he can veto the potential trade.
d. The expectation of gain motivates people to engage in trade.
b. What one trader gains from a trade, the other must lose.
12. Which of the following is true?
a. Scarcity and poverty are basically the same thing.
b. The absence of scarcity means that a minimal level of income is provided to all individuals.
c. Goods are scarce because of greed.
d. Even in the wealthiest of countries, the desire for material goods is greater than productive capabilities.
a. Scarcity and poverty are basically the same thing.
b. The absence of scarcity means that a minimal level of income is provided to all individuals.
c. Goods are scarce because of greed.
d. Even in the wealthiest of countries, the desire for material goods is greater than productive capabilities.
d. Even in the wealthiest of countries, the desire for material goods is greater than productive
13. An example of a capital resource is
a. stock in a computer software company.
b. the funds in a CD account at a bank.
c. a bond issued by a company selling electric generators.
d. a dump truck.
e. an employee of a moving company.
a. stock in a computer software company.
b. the funds in a CD account at a bank.
c. a bond issued by a company selling electric generators.
d. a dump truck.
e. an employee of a moving company.
d. a dump truck.
Which of the following statements is true?
a. The opportunity cost of a decision is always expressed in monetary terms.
b. The opportunity cost of a decision is the value of the best forgone alternative.
c. Some economic decisions have zero opportunity cost.
d. The opportunity cost of attending college is the same for all students at the same university but may differ among students at different universities.
e. None of the above statements is true.
a. The opportunity cost of a decision is always expressed in monetary terms.
b. The opportunity cost of a decision is the value of the best forgone alternative.
c. Some economic decisions have zero opportunity cost.
d. The opportunity cost of attending college is the same for all students at the same university but may differ among students at different universities.
e. None of the above statements is true.
b. The opportunity cost of a decision is the value of the best forgone alternative.
The opportunity cost of attending college is likely to include all except which of the following?
a. The cost of required textbooks.
b. Tuition fees.
c. The income you forgo in order to attend classes.
d. The cost of haircuts received during the school term.
e. The cost of paper and pencils needed to take notes.
a. The cost of required textbooks.
b. Tuition fees.
c. The income you forgo in order to attend classes.
d. The cost of haircuts received during the school term.
e. The cost of paper and pencils needed to take notes.
d. The cost of haircuts received during the school term.
16. The opportunity cost of an airplane flight
a. differs across passengers only to the extent that each traveler pays a different airfare.
b. is identical for all passengers and equal to the number of hours a particular flight takes.
c. differs across passengers to the extent that both the airfare paid and the highest valued use of travel time vary.
d. is equal to the cost of a bus ticket, the next best form of alternative transportation to flying.
a. differs across passengers only to the extent that each traveler pays a different airfare.
b. is identical for all passengers and equal to the number of hours a particular flight takes.
c. differs across passengers to the extent that both the airfare paid and the highest valued use of travel time vary.
d. is equal to the cost of a bus ticket, the next best form of alternative transportation to flying.
c. differs across passengers to the extent that both the airfare paid and the highest valued use of travel time vary.
17. Lance’s boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a romantic date.
This offer will likely
a. not affect the opportunity cost of going on the date.
b. reduce the opportunity cost of going on the date because giving up the additional work dollars will make his girlfriend feel even more appreciated.
c. increase the opportunity cost of going on the date.
d. not be taken into consideration by Lance when deciding what to do tonight.
This offer will likely
a. not affect the opportunity cost of going on the date.
b. reduce the opportunity cost of going on the date because giving up the additional work dollars will make his girlfriend feel even more appreciated.
c. increase the opportunity cost of going on the date.
d. not be taken into consideration by Lance when deciding what to do tonight.
c. increase the opportunity cost of going on the date.
18. Which of the following best defines rational behavior?
a. Analyzing the total costs of a decision.
b. Analyzing the total benefits of a decision.
c. Undertaking an activity as long as the total benefit of all activities exceeds the total cost of all activities.
d. Undertaking activities whenever the marginal benefit exceeds the marginal cost.
e. Undertaking activities as long as the marginal benefit exceeds zero.
a. Analyzing the total costs of a decision.
b. Analyzing the total benefits of a decision.
c. Undertaking an activity as long as the total benefit of all activities exceeds the total cost of all activities.
d. Undertaking activities whenever the marginal benefit exceeds the marginal cost.
e. Undertaking activities as long as the marginal benefit exceeds zero.
d. Undertaking activities whenever the marginal benefit exceeds the marginal cost.
19. Gallons of milk at a local grocery store are priced at one for $4 or two for $6. The marginal cost of buying a second gallon of milk equals
a. $6.
b. $4.
c. $3.
d. $2.
e. $0.
a. $6.
b. $4.
c. $3.
d. $2.
e. $0.
d. $2.
20. Which of the following statements is most consistent with the rule of rational choice?
a. The Environmental Protection Agency should strive to eliminate virtually all air and water pollution.
b. When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug’s potential health benefits against the potential health risks posed by known side effects.
c. Police forces should be enlarged until virtually all crime is eliminated.
d. Manufacturers of automobiles should seek to make cars safer, no matter the costs involved.
a. The Environmental Protection Agency should strive to eliminate virtually all air and water pollution.
b. When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug’s potential health benefits against the potential health risks posed by known side effects.
c. Police forces should be enlarged until virtually all crime is eliminated.
d. Manufacturers of automobiles should seek to make cars safer, no matter the costs involved.
b. When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug’s potential health benefits against the potential health risks posed by known side effects.
21. Kelly is an attorney and also an excellent typist. She can type 120 words per minute, but she is pressed for time because she has all the legal work she can handle at $75.00 per hour. Kelly’s friend Todd works as a waiter and would like some typing work (provided that he can make at least his wage as a waiter, which is $25.00 per hour). Todd can type only 60 words per minute.
a. Kelly should do all the typing because she is faster.
b. Todd should do the typing as long as his earnings are more than $25.00 and less than $37.50 per hour.
c. Unless Todd can match Kelly’s typing speed, he should remain a waiter.
d. Todd should do the typing, and Kelly should pay him $20.00 per hour.
e. Both a and c are correct.
a. Kelly should do all the typing because she is faster.
b. Todd should do the typing as long as his earnings are more than $25.00 and less than $37.50 per hour.
c. Unless Todd can match Kelly’s typing speed, he should remain a waiter.
d. Todd should do the typing, and Kelly should pay him $20.00 per hour.
e. Both a and c are correct.
b. Todd should do the typing as long as his earnings are more than $25.00 and less than $37.50 per hour.
Differences in the conditions under which the exchange between buyers and sellers occurs make it difficult to precisely define a market.
True
All markets are effectively global in scope.
False
The relationship between price and quantity demanded is inverse or negative
True
The market demand curve is the vertical summation of individual demand curves.
False
A change in a good’s price does not change its demand.
True
A change in demand is illustrated by a shift in the entire demand curve
True
Because personal tastes differ, what are substitutes for one person may not be substitutes for another person.
True
. Two goods are complements if an increase in the price of one causes an increase in the demand for the other.
False
. Those goods for which falling income leads to decreased demand are called inferior goods.
False
Either an increase in the number of buyers or an increase in tastes or preferences for a good or service will increase the market demand for a good or service.
True
A decrease in the price of ice cream would cause an increase in the demand for frozen yogurt, a substitute.
False
The law of supply states that, other things being equal, the quantity supplied will vary directly (a positive relationship) with the price of the good.
True
The market supply curve for a product is the vertical summation of the supply curves for individual firms.
False
A change in the price of a good leads to a change in the quantity supplied, but not to a change in its supply.
True
An increase in supply leads to a movement up along the supply curve.
False
A decrease in supply shifts the supply curve to the left.
True
Just as demanders will demand more now if the price of a good is expected to rise in the near future, sellers will supply more now if the price of a good is expected to rise in the near future.
False
Both technological progress and cost-increasing regulations will increase supply.
False
Which of the following is a market?
a. a garage sale
b. a restaurant
c. the New York Stock Exchange
d. an eBay auction
e. all of the above
a. a garage sale
b. a restaurant
c. the New York Stock Exchange
d. an eBay auction
e. all of the above
e. all of the above
In a competitive market,
a. there are a number of buyers and sellers.
b. no single buyer or seller can appreciably affect the market price.
c. sellers offer similar products.
d. all of the above are true.
a. there are a number of buyers and sellers.
b. no single buyer or seller can appreciably affect the market price.
c. sellers offer similar products.
d. all of the above are true.
d. all of the above are true.
If the demand for milk is downward sloping, then an increase in the price of milk will result in a(n)
a. increase in the demand for milk.
b. decrease in the demand for milk.
c. increase in the quantity of milk demanded.
d. decrease in the quantity of milk demanded.
e. decrease in the supply of milk.
a. increase in the demand for milk.
b. decrease in the demand for milk.
c. increase in the quantity of milk demanded.
d. decrease in the quantity of milk demanded.
e. decrease in the supply of milk.
d. decrease in the quantity of milk demanded.
Which of the following would be most likely to increase the demand for jelly?
a. An increase in the price of peanut butter, which is often used with jelly
b. An increase in income; jelly is a normal good
c. The price of jelly falls
d. Medical research that finds that daily consumption of jelly makes people live 10 years less, on average
a. An increase in the price of peanut butter, which is often used with jelly
b. An increase in income; jelly is a normal good
c. The price of jelly falls
d. Medical research that finds that daily consumption of jelly makes people live 10 years less, on average
b. An increase in income; jelly is a normal good
Which of the following would not cause a change in the demand for cheese?
a. an increase in the price of crackers, which are consumed with cheese
b. an increase in the income of cheese consumers
c. an increase in the population of cheese lovers
d. an increase in the price of cheese
a. an increase in the price of crackers, which are consumed with cheese
b. an increase in the income of cheese consumers
c. an increase in the population of cheese lovers
d. an increase in the price of cheese
d. an increase in the price of cheese
Ceteris paribus, an increase in the price of DVD players would tend to
a. decrease the demand for DVD players.
b. increase the price of televisions, a complement to DVD players.
c. increase the demand for DVD players.
d. decrease the demand for DVDs.
a. decrease the demand for DVD players.
b. increase the price of televisions, a complement to DVD players.
c. increase the demand for DVD players.
d. decrease the demand for DVDs.
d. decrease the demand for DVDs.
Whenever the price of Good A decreases, the demand for Good B increases. Goods A and B appear to be
a. complements.
b. substitutes.
c. inferior goods.
d. normal goods.
e. inverse goods.
a. complements.
b. substitutes.
c. inferior goods.
d. normal goods.
e. inverse goods.
a. complements.
Whenever the price of Good A increases, the demand for Good B increases as well. Goods A and B appear to be
a. complements.
b. substitutes.
c. inferior goods.
d. normal goods.
e. inverse goods.
a. complements.
b. substitutes.
c. inferior goods.
d. normal goods.
e. inverse goods.
b. substitutes.
The difference between a change in quantity demanded and a change in demand is that a change in
a. quantity demanded is caused by a change in a good’s own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.
b. demand is caused by a change in a good’s own price, while a change in quantity demanded is caused by a change in some other variable, such as income, tastes, or expectations.
c. quantity demanded is a change in the amount people actually buy, while a change in demand is a change in the amount they want to buy.
d. This is a trick question. A change in demand and a change in quantity demanded are the same thing.
a. quantity demanded is caused by a change in a good’s own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.
b. demand is caused by a change in a good’s own price, while a change in quantity demanded is caused by a change in some other variable, such as income, tastes, or expectations.
c. quantity demanded is a change in the amount people actually buy, while a change in demand is a change in the amount they want to buy.
d. This is a trick question. A change in demand and a change in quantity demanded are the same thing.
a. quantity demanded is caused by a change in a good’s own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.
Suppose CNN announces that bad weather in Central America has greatly reduced the number of cocoa bean plants and for this reason the price of chocolate is expected to rise soon. As a result,
a. the current market demand for chocolate will decrease.
b. the current market demand for chocolate will increase.
c. the current quantity demanded for chocolate will decrease.
d. no change will occur in the current market for chocolate.
a. the current market demand for chocolate will decrease.
b. the current market demand for chocolate will increase.
c. the current quantity demanded for chocolate will decrease.
d. no change will occur in the current market for chocolate.
b. the current market demand for chocolate will increase.
An upward-sloping supply curve shows that
a. buyers are willing to pay more for particularly scarce products.
b. suppliers expand production as the product price falls.
c. suppliers are willing to increase production of their goods if they receive higher prices for them.
d. buyers are willing to buy more as the product price falls.
a. buyers are willing to pay more for particularly scarce products.
b. suppliers expand production as the product price falls.
c. suppliers are willing to increase production of their goods if they receive higher prices for them.
d. buyers are willing to buy more as the product price falls.
c. suppliers are willing to increase production of their goods if they receive higher prices for them.
Along a supply curve,
a. supply changes as price changes.
b. quantity supplied changes as price changes.
c. supply changes as technology changes.
d. quantity supplied changes as technology changes.
a. supply changes as price changes.
b. quantity supplied changes as price changes.
c. supply changes as technology changes.
d. quantity supplied changes as technology changes.
b. quantity supplied changes as price changes.
All of the following factors will affect the supply of shoes except one. Which will not affect the supply of shoes?
a. higher wages for shoe factory workers
b. higher prices for leather
c. a technological improvement that reduces waste of leather and other raw materials in shoe production
d. an increase in consumer income
a. higher wages for shoe factory workers
b. higher prices for leather
c. a technological improvement that reduces waste of leather and other raw materials in shoe production
d. an increase in consumer income
d. an increase in consumer income
The difference between a change in quantity supplied and a change in supply is that a change in
a. quantity supplied is caused by a change in a good’s own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
b. supply is caused by a change in a good’s own price, while a change in the quantity supplied is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
c. quantity supplied is a change in the amount people want to sell, while a change in supply is a change in the amount they actually sell.
d. supply and a change in the quantity supplied are the same thing.
a. quantity supplied is caused by a change in a good’s own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
b. supply is caused by a change in a good’s own price, while a change in the quantity supplied is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
c. quantity supplied is a change in the amount people want to sell, while a change in supply is a change in the amount they actually sell.
d. supply and a change in the quantity supplied are the same thing.
a. quantity supplied is caused by a change in a good’s own price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.
Antonio’s makes the greatest pizza and delivers it hot to all the dorms around campus. Last week Antonio’s supplier of pepperoni informed him of a 25% increase in price. Which variable determining the position of the supply curve has changed, and what effect does it have on supply?
a. future expectations; supply decreases
b. future expectations; supply increases
c. input prices; supply decreases
d. input prices; supply increases
e. technology; supply increases
a. future expectations; supply decreases
b. future expectations; supply increases
c. input prices; supply decreases
d. input prices; supply increases
e. technology; supply increases
c. input prices; supply decreases
Which of the following is not a determinant of supply?
a. input prices
b. technology
c. tastes
d. expectations
e. the prices of substitutes in production
a. input prices
b. technology
c. tastes
d. expectations
e. the prices of substitutes in production
c. tastes
If incomes are rising, in the market for an inferior good,
a. demand will rise.
b. demand will fall.
c. supply will rise.
d. supply will fall.
a. demand will rise.
b. demand will fall.
c. supply will rise.
d. supply will fall.
b. demand will fall.
If a farmer were choosing between growing wheat on his own land and growing soybeans on his own land,
a. an increase in the price of soybeans would increase his supply of soybeans.
b. an increase in the price of soybeans would increase his supply of wheat.
c. an increase in the price of soybeans would decrease his supply of soybeans.
d. an increase in the price of soybeans would decrease his supply of wheat.
e. an increase in the price of soybeans would not change his supply of either wheat or soybeans.
a. an increase in the price of soybeans would increase his supply of soybeans.
b. an increase in the price of soybeans would increase his supply of wheat.
c. an increase in the price of soybeans would decrease his supply of soybeans.
d. an increase in the price of soybeans would decrease his supply of wheat.
e. an increase in the price of soybeans would not change his supply of either wheat or soybeans.
d. an increase in the price of soybeans would decrease his supply of wheat.
A supply curve illustrates a(n) ________ relationship between _________ and _________.
a. direct; price; supply
b. direct; price; quantity demanded
c. direct; price; quantity supplied
d. introverted; price; quantity demanded
e. inverse; price; quantity supplied
a. direct; price; supply
b. direct; price; quantity demanded
c. direct; price; quantity supplied
d. introverted; price; quantity demanded
e. inverse; price; quantity supplied
c. direct; price; quantity supplied
A leftward shift in supply could be caused by
a. an improvement in productive technology.
b. a decrease in income.
c. some firms leaving the industry.
d. a fall in the price of inputs to the industry.
a. an improvement in productive technology.
b. a decrease in income.
c. some firms leaving the industry.
d. a fall in the price of inputs to the industry.
c. some firms leaving the industry.
If the quantity demanded does not equal the quantity supplied, a shortage will always occur.
False
At the equilibrium price, the quantity demanded equals the quantity supplied.
True
A decrease in demand results in a lower equilibrium price and a higher equilibrium quantity.
False
An increase in supply results in a lower equilibrium price and a higher equilibrium quantity.
True
An increase in supply, combined with a decrease in demand, will decrease the equilibrium price but result in an indeterminate change in the equilibrium quantity.
True
If supply increases and demand decreases, but the increase in supply is greater than the decrease in demand, the equilibrium quantity will decrease.
False
An increase in both demand and supply increases the equilibrium quantity.
True
Neither a price ceiling at the equilibrium price nor a price floor at the equilibrium price would have any effect on the market price or quantity exchanged.
True
A price ceiling decreases the quantity of a good exchanged, but a price floor increases the quantity of a good exchanged.
False
A minimum wage (price floor) is likely to be binding in the market for experienced and skilled workers.
False
1. A market will experience a ________ in a situation where quantity supplied exceeds quantity demanded and a _______ in a situation where quantity demanded exceeds quantity supplied.
a. shortage; shortage
b. surplus; surplus
c. shortage; surplus
d. surplus; shortage
a. shortage; shortage
b. surplus; surplus
c. shortage; surplus
d. surplus; shortage
d. surplus; shortage
. The price of a good will tend to rise when
a. a temporary shortage at the current price occurs (assuming no price controls are imposed).
b. a temporary surplus at the current price occurs (assuming no price controls are imposed).
c. demand decreases.
d. supply increases.
a. a temporary shortage at the current price occurs (assuming no price controls are imposed).
b. a temporary surplus at the current price occurs (assuming no price controls are imposed).
c. demand decreases.
d. supply increases.
a. a temporary shortage at the current price occurs (assuming no price controls are imposed).
Other things equal, a decrease in consumer income would
a. increase the price and increase the quantity of autos exchanged.
b. increase the price and decrease the quantity of autos exchanged.
c. decrease the price and increase the quantity of autos exchanged.
d. decrease the price and decrease the quantity of autos exchanged.
a. increase the price and increase the quantity of autos exchanged.
b. increase the price and decrease the quantity of autos exchanged.
c. decrease the price and increase the quantity of autos exchanged.
d. decrease the price and decrease the quantity of autos exchanged.
d. decrease the price and decrease the quantity of autos exchanged.
An increase in the expected future price of a good by consumers would, other things equal,
a. increase the current price and increase the current quantity exchanged.
b. increase the current price and decrease the current quantity exchanged.
c. decrease the current price and increase the current quantity exchanged.
d. decrease the current price and decrease the current quantity exchanged.
a. increase the current price and increase the current quantity exchanged.
b. increase the current price and decrease the current quantity exchanged.
c. decrease the current price and increase the current quantity exchanged.
d. decrease the current price and decrease the current quantity exchanged.
a. increase the current price and increase the current quantity exchanged.
Assume that airline travel is a normal good and intercity bus travel is an inferior good. Higher incomes would
a. increase both the price and the quantity of airline travel.
b. decrease both the price and quantity of airline travel.
c. increase the price and decrease the quantity of intercity bus travel.
d. decrease the price and increase the quantity of intercity bus travel.
a. increase both the price and the quantity of airline travel.
b. decrease both the price and quantity of airline travel.
c. increase the price and decrease the quantity of intercity bus travel.
d. decrease the price and increase the quantity of intercity bus travel.
a. increase both the price and the quantity of airline travel.
If you observed the price of a good increasing and the quantity exchanged decreasing, it would be most likely caused by
a. an increase in demand.
b. a decrease in demand.
c. an increase in supply.
d. a decrease in supply.
a. an increase in demand.
b. a decrease in demand.
c. an increase in supply.
d. a decrease in supply.
d. a decrease in supply.
If you observed the price of a good decreasing and the quantity exchanged increasing, it would be most likely caused by
a. an increase in demand.
b. a decrease in demand.
c. an increase in supply.
d. a decrease in supply.
a. an increase in demand.
b. a decrease in demand.
c. an increase in supply.
d. a decrease in supply.
c. an increase in supply.
If you observed the price of a good decreasing and the quantity exchanged decreasing, it would be most likely caused by
a. an increase in demand.
b. a decrease in demand.
c. an increase in supply.
d. a decrease in supply.
a. an increase in demand.
b. a decrease in demand.
c. an increase in supply.
d. a decrease in supply.
b. a decrease in demand.
10. If many cooks consider butter and margarine to be substitutes, and the price of butter rises, then in the market for margarine
a. the equilibrium price will rise, while the change to equilibrium quantity is indeterminate.
b. the equilibrium price will rise, and the equilibrium quantity will fall.
c. both the equilibrium price and equilibrium quantity will rise.
d. both the equilibrium price and equilibrium quantity will fall.
e. the equilibrium price will fall, and the equilibrium quantity will rise.
a. the equilibrium price will rise, while the change to equilibrium quantity is indeterminate.
b. the equilibrium price will rise, and the equilibrium quantity will fall.
c. both the equilibrium price and equilibrium quantity will rise.
d. both the equilibrium price and equilibrium quantity will fall.
e. the equilibrium price will fall, and the equilibrium quantity will rise.
b. the equilibrium price will rise, and the equilibrium quantity will fall.
If you observed that the market price of a good rose while the quantity exchanged fell, which of the following could have caused the change?
a. an increase in supply
b. a decrease in supply
c. an increase in demand
d. a decrease in demand
e. none of the above
a. an increase in supply
b. a decrease in supply
c. an increase in demand
d. a decrease in demand
e. none of the above
b. a decrease in supply
If both supply and demand decreased, but supply decreased more than demand, the result would be
a. a higher price and a lower equilibrium quantity.
b. a lower price and a lower equilibrium quantity.
c. no change in the price and a lower equilibrium quantity.
d. a higher price and a greater equilibrium quantity.
e. a lower price and a greater equilibrium quantity.
a. a higher price and a lower equilibrium quantity.
b. a lower price and a lower equilibrium quantity.
c. no change in the price and a lower equilibrium quantity.
d. a higher price and a greater equilibrium quantity.
e. a lower price and a greater equilibrium quantity.
a. a higher price and a lower equilibrium quantity.
If the equilibrium price of wheat is $3 per bushel and then a price floor of $2.50 per bushel is imposed by the government,
a. there will be no effect on the wheat market.
b. there will be a shortage of wheat.
c. there will be a surplus of wheat.
d. the price of wheat will decrease.
a. there will be no effect on the wheat market.
b. there will be a shortage of wheat.
c. there will be a surplus of wheat.
d. the price of wheat will decrease.
a. there will be no effect on the wheat market.
14. If both supply and demand for a good shifted the same amount to the right, then we would expect that
a. both the price and quantity exchanged would increase.
b. price would not change and quantity exchanged would increase.
c. the price would increase and quantity exchanged would not change.
d. neither the price nor the quantity exchanged would change.
a. both the price and quantity exchanged would increase.
b. price would not change and quantity exchanged would increase.
c. the price would increase and quantity exchanged would not change.
d. neither the price nor the quantity exchanged would change.
b. price would not change and quantity exchanged would increase.
If, in a given market, the price of inputs increases and income increases (assuming it is a normal good), then
a. price would increase but the change in quantity exchanged would be indeterminate.
b. price would decrease but the change in quantity exchanged would be indeterminate.
c. quantity exchanged would increase but the change in price would be indeterminate.
d. quantity exchanged would decrease but the change in price would be indeterminate.
a. price would increase but the change in quantity exchanged would be indeterminate.
b. price would decrease but the change in quantity exchanged would be indeterminate.
c. quantity exchanged would increase but the change in price would be indeterminate.
d. quantity exchanged would decrease but the change in price would be indeterminate.
a. price would increase but the change in quantity exchanged would be indeterminate.
Which of the following is true?
a. A price ceiling reduces the quantity exchanged in the market, but a price floor increases the quantity exchanged in the market.
b. A price ceiling increases the quantity exchanged in the market, but a price floor decreases the quantity exchanged in the market.
c. Both price floors and price ceilings reduce the quantity exchanged in the market.
d. Both price floors and price ceilings increase the quantity exchanged in the market.
a. A price ceiling reduces the quantity exchanged in the market, but a price floor increases the quantity exchanged in the market.
b. A price ceiling increases the quantity exchanged in the market, but a price floor decreases the quantity exchanged in the market.
c. Both price floors and price ceilings reduce the quantity exchanged in the market.
d. Both price floors and price ceilings increase the quantity exchanged in the market.
c. Both price floors and price ceilings reduce the quantity exchanged in the market.
If a price floor was set at the current equilibrium price, which of the following would cause a surplus as a result?
a. an increase in demand
b. a decrease in demand
c. an increase in supply
d. a decrease in supply
e. either b or c
a. an increase in demand
b. a decrease in demand
c. an increase in supply
d. a decrease in supply
e. either b or c
e. either b or c
The quantity exchanged on a market tends to
a. increase for both price floors and price ceilings.
b. decrease for both price floors and price ceilings.
c. increase for price floors and decrease for price ceilings.
d. decrease for price floors and increase for price ceilings.
a. increase for both price floors and price ceilings.
b. decrease for both price floors and price ceilings.
c. increase for price floors and decrease for price ceilings.
d. decrease for price floors and increase for price ceilings.
b. decrease for both price floors and price ceilings.
A current shortage is due to a price ceiling. If the price ceiling is removed,
a. price would increase, quantity supplied would increase, and quantity demanded would decrease.
b. price would increase, quantity supplied would decrease, and quantity demanded would increase.
c. price would decrease, quantity supplied would increase, and quantity demanded would decrease.
d. price would decrease, quantity supplied would decrease, and quantity demanded would increase.
a. price would increase, quantity supplied would increase, and quantity demanded would decrease.
b. price would increase, quantity supplied would decrease, and quantity demanded would increase.
c. price would decrease, quantity supplied would increase, and quantity demanded would decrease.
d. price would decrease, quantity supplied would decrease, and quantity demanded would increase.
a. price would increase, quantity supplied would increase, and quantity demanded would decrease.
A current surplus is due to a price floor. If the price floor is removed,
a. price would increase, quantity demanded would increase, and quantity supplied would increase.
b. price would increase, quantity demanded would decrease, and quantity supplied would decrease.
c. price would decrease, quantity demanded would increase, and quantity supplied would decrease.
d. price would decrease, quantity demanded would decrease, and quantity supplied would increase.
a. price would increase, quantity demanded would increase, and quantity supplied would increase.
b. price would increase, quantity demanded would decrease, and quantity supplied would decrease.
c. price would decrease, quantity demanded would increase, and quantity supplied would decrease.
d. price would decrease, quantity demanded would decrease, and quantity supplied would increase.
c. price would decrease, quantity demanded would increase, and quantity supplied would decrease.
Which of the following will most likely occur with a 20 percent increase in the minimum wage?
a. higher unemployment rates among experienced and skilled workers
b. higher unemployment rates among young and low-skilled workers
c. lower unemployment rates for young and low-skilled workers
d. the price floor (minimum wage) will be binding in the young and low-skilled labor market but not in the experienced and skilled labor market
e. both b. and d.
a. higher unemployment rates among experienced and skilled workers
b. higher unemployment rates among young and low-skilled workers
c. lower unemployment rates for young and low-skilled workers
d. the price floor (minimum wage) will be binding in the young and low-skilled labor market but not in the experienced and skilled labor market
e. both b. and d.
e. both b. and d.
