Econ 1B Final - Assignment Essays

question

"Every family in the United States should have an annual income of at least $10,000 in order to meet minimum food, shelter, and health requirements." This is an example of

answer

a normative economics statement.

question

Which of the following is a normative statement?

answer

Taxes should be raised to finance street repairs

question

The necessity for choice, in economics, arises from

answer

scarcity of resources for satisfying economic wants

question

Questions of what to produce, how much to produce, and who will get the output must be faced by

answer

all economies

question

Although specialization of labor increases efficiency of production, it can lead to another major problem:

answer

the need to exchange goods among producers

question

An increase in the price of a good:

answer

will cause a decrease in the quantity demanded

question

The law of demand states that

answer

as the price increases, total quantity demanded will decrease

question

To construct a demand curve, an economist needs data on price and quantity. Each point on the demand curve is

answer

a quantity demanded at that price

question

Why does quantity demanded decrease when price increases?

answer

People choose to reduce consumption of the item, People "drop out" of the market for the item, People find substitutes for the item. (all the above)

question

Which of the following will shift the demand curve for good X?

answer

a change in the income of buyers of good X

question

If orange juice prices double in 1997, there will be a

answer

rightward shift in the demand for grapefruit juice.

question

If the demand for steak shifts to the right, the most likely explanation is that

answer

consumer income has risen

question

An upward-sloping supply curve shows that

answer

suppliers are willing to increase production of their goods if they can receive higher prices for them

question

Studies at Cornell University revealed that chickens grow 2 percent more weight when a red mitten is placed in their cage and Vivaldi is played in the coop. Resultant feed savings are
estimated at $60 million a year. In the chicken market, the

answer

supply curve shifts to the right

question

In January, 2,500 quarts of ice cream are sold in Boston at $2 a quart. In February, 3,000 quarts are sold at $2.50 a quart. This change in quantity sold and price may have been caused by

answer

the release of a medical study showing that ice cream consumption improves mental health

question

Consider the market for fast-food hamburgers. Two things happen: (1) consumption of burgers is found to improve health, and (2) prices of pizza and sandwiches go up. In the new equilibrium, the price of burgers will _____ and the quantity of burgers consumed will ______.

answer

increase; increase

question

Two studies published in the New England Journal of Medicine link the risk of breast
cancer to alcohol consumption. Young women who have nine drinks per week were reportedly 150 percent more likely to develop breast cancer. Considering the market for alcohol, an economist would predict a movement

answer

down the supply curve as the demand curve shifts

question

Consumer surplus is a measure of

answer

how much more value a consumer receives from his purchases than he has to pay for them

question

An increase in supply will have what effect on equilibrium price and quantity?

answer

Price will decrease, quantity will increase

question

Which of the following is the correct way to describe equilibrium in a market?

answer

At equilibrium, quantity demanded equals quantity supplied

question

Suppose the price of a commodity is $15 per unit. At that price, consumers wish to
purchase 6,000 units weekly and producers wish to sell 4,000 units weekly. In this situation,

answer

unsatisfied consumers will bid up the market price

question

Which of the following would cause a fall in the price of video tape rentals?

answer

A new nationwide video rental chain opens.

question

A fear that consumption of beef may be related to a life threatening disease spreads rapidly through France. The market result will be:

answer

the demand shifts left, price decreases and the quantity supplied therefore falls

question

New safety regulations increase manufacturers' costs of producing signs. What happens in the market for signs?

answer

The supply shifts left, resulting in a higher equilibrium price and lower equilibrium quantity

question

Why is exchange important to a nation's prosperity?

answer

Trade creates value.
Both parties are better off.
It increases the wealth created by a society.
Exchange leads to specialization
(all the above)

question

Suppose that IVY College administrators propose to increase revenue by raising tuition for all students. The college administrators are assuming that the (absolute value of the) price elasticity of demand for education is:

answer

Less than 1.0

question

The staff economist for Barnaby's Boots estimates that if the firm increases the price of its boots by 10 percent, it would lead to a 6 percent reduction in the quantity of boots demanded. If the firm was interested in maximizing total revenue , it should.

answer

increase price 10%

question

The price elasticity of a good depends on the price of a good relative to consumers' incomes. Which of the following goods has the most elastic demand?

answer

Swing set

question

A 4% increase in the price of beer will cause a 1% decline in the quantity of beer demanded. The demand for beer is:

answer

inelastic

question

A perfectly elastic supply curve is:

answer

horizontal

question

If the cross-price elasticity of demand of two goods is positive, we can conclude that the two goods are:

answer

substitutes

question

If the demand curve is elastic a price______ causes an _____ in revenues.

answer

decrease; increase

question

(Figure) If price decreases from $20 to $10, total revenue will:

answer

increase by $1500, so the demand curve is elastic

question

A product would be more demand price elastic

answer

The lower the price of the good

question

An industry is said to be perfectly competitive when:

answer

Each firm has virtually no influence over the price of its product

question

Marginal cost is:

answer

The change in the total cost from producing one more unit of output

question

A perfectly competitive industry exists under which of the following conditions?

answer

1. The product sold is similar across firms
2. There are many sellers, each small relative to the total market
4. The threat of competition exists from potential sellers that have not yet entered the market

question

A competitive firm maximizes profits at the point where P=MC. (T/F)

answer

True

question

As the price of a good fluctuates, a profit-maximizing firm will expand or contract production along its:

answer

Marginal cost curve

question

Average total cost is equal to the total cost divided by profit. (T/F)

answer

False

question

Damien produces 400 gallons of milk a day in a very competitive industry. The market price for a gallon of milk is $2. Damien's marginal revenue per gallon of milk is:

answer

question

Profit is defined as:

answer

Total revenue minus total cost

question

A competitive firm maximizes profit when marginal cost:

answer

Equals the price

question

Profit maximization occurs when:

answer

MR=MC

question

Which one of the following is not an assumption of the competitive model?

answer

Economies of scale

question

If marginal cost is less than average cost, average cost is rising. (T/F)

answer

False

question

For a small firm in an extremely competitive industry , marginal revenue is always equal to price because:

answer

The firm has no ability to influence the market price

question

Firms in competitive industries:

answer

1. Can only charge a price equal to the market price.
2. Cannot charge any more than the market price.
3. Will earn less profit if they charge less than the market price.

question

After a significant decrease in the price of a variable input,

answer

Marginal cost shifts downward and output rises

question

Which of the following is a primary difference between price searchers (monopoly) and price takers (perfect competition) ?

answer

Price searchers have to cut their price to sell additional output, but price takers do not.

1 of 50

question

"Every family in the United States should have an annual income of at least $10,000 in order to meet minimum food, shelter, and health requirements." This is an example of

answer

a normative economics statement.

question

Which of the following is a normative statement?

answer

Taxes should be raised to finance street repairs

question

The necessity for choice, in economics, arises from

answer

scarcity of resources for satisfying economic wants

question

Questions of what to produce, how much to produce, and who will get the output must be faced by

answer

all economies

question

Although specialization of labor increases efficiency of production, it can lead to another major problem:

answer

the need to exchange goods among producers

question

An increase in the price of a good:

answer

will cause a decrease in the quantity demanded

question

The law of demand states that

answer

as the price increases, total quantity demanded will decrease

question

To construct a demand curve, an economist needs data on price and quantity. Each point on the demand curve is

answer

a quantity demanded at that price

question

Why does quantity demanded decrease when price increases?

answer

People choose to reduce consumption of the item, People "drop out" of the market for the item, People find substitutes for the item. (all the above)

question

Which of the following will shift the demand curve for good X?

answer

a change in the income of buyers of good X

question

If orange juice prices double in 1997, there will be a

answer

rightward shift in the demand for grapefruit juice.

question

If the demand for steak shifts to the right, the most likely explanation is that

answer

consumer income has risen

question

An upward-sloping supply curve shows that

answer

suppliers are willing to increase production of their goods if they can receive higher prices for them

question

answer

supply curve shifts to the right

question

In January, 2,500 quarts of ice cream are sold in Boston at $2 a quart. In February, 3,000 quarts are sold at $2.50 a quart. This change in quantity sold and price may have been caused by

answer

the release of a medical study showing that ice cream consumption improves mental health

question

answer

increase; increase

question

answer

down the supply curve as the demand curve shifts

question

Consumer surplus is a measure of

answer

how much more value a consumer receives from his purchases than he has to pay for them

question

An increase in supply will have what effect on equilibrium price and quantity?

answer

Price will decrease, quantity will increase

question

Which of the following is the correct way to describe equilibrium in a market?

answer

At equilibrium, quantity demanded equals quantity supplied

question

Suppose the price of a commodity is $15 per unit. At that price, consumers wish to
purchase 6,000 units weekly and producers wish to sell 4,000 units weekly. In this situation,

answer

unsatisfied consumers will bid up the market price

question

Which of the following would cause a fall in the price of video tape rentals?

answer

A new nationwide video rental chain opens.

question

A fear that consumption of beef may be related to a life threatening disease spreads rapidly through France. The market result will be:

answer

the demand shifts left, price decreases and the quantity supplied therefore falls

question

New safety regulations increase manufacturers' costs of producing signs. What happens in the market for signs?

answer

The supply shifts left, resulting in a higher equilibrium price and lower equilibrium quantity

question

Why is exchange important to a nation's prosperity?

answer

Trade creates value.
Both parties are better off.
It increases the wealth created by a society.
Exchange leads to specialization
(all the above)

question

answer

Less than 1.0

question

answer

increase price 10%

question

The price elasticity of a good depends on the price of a good relative to consumers' incomes. Which of the following goods has the most elastic demand?

answer

Swing set

question

A 4% increase in the price of beer will cause a 1% decline in the quantity of beer demanded. The demand for beer is:

answer

inelastic

question

A perfectly elastic supply curve is:

answer

horizontal

question

If the cross-price elasticity of demand of two goods is positive, we can conclude that the two goods are:

answer

substitutes

question

If the demand curve is elastic a price______ causes an _____ in revenues.

answer

decrease; increase

question

(Figure) If price decreases from $20 to $10, total revenue will:

answer

increase by $1500, so the demand curve is elastic

question

A product would be more demand price elastic

answer

The lower the price of the good

question

An industry is said to be perfectly competitive when:

answer

Each firm has virtually no influence over the price of its product

question

Marginal cost is:

answer

The change in the total cost from producing one more unit of output

question

A perfectly competitive industry exists under which of the following conditions?

answer

question

A competitive firm maximizes profits at the point where P=MC. (T/F)

answer

True

question

As the price of a good fluctuates, a profit-maximizing firm will expand or contract production along its:

answer

Marginal cost curve

question

Average total cost is equal to the total cost divided by profit. (T/F)

answer

False

question

Damien produces 400 gallons of milk a day in a very competitive industry. The market price for a gallon of milk is $2. Damien's marginal revenue per gallon of milk is:

answer

question

Profit is defined as:

answer

Total revenue minus total cost

question

A competitive firm maximizes profit when marginal cost:

answer

Equals the price

question

Profit maximization occurs when:

answer

MR=MC

question

Which one of the following is not an assumption of the competitive model?

answer

Economies of scale

question

If marginal cost is less than average cost, average cost is rising. (T/F)

answer

False

question

For a small firm in an extremely competitive industry , marginal revenue is always equal to price because:

answer

The firm has no ability to influence the market price

question

Firms in competitive industries:

answer

1. Can only charge a price equal to the market price.
2. Cannot charge any more than the market price.
3. Will earn less profit if they charge less than the market price.

question

After a significant decrease in the price of a variable input,

answer

Marginal cost shifts downward and output rises

question

Which of the following is a primary difference between price searchers (monopoly) and price takers (perfect competition) ?

answer

Price searchers have to cut their price to sell additional output, but price takers do not.

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