question
A simultaneous increase in demand and a decrease in supply would cause the equilibrium price to rise.
answer
True
question
A hard freeze in Florida that destroys 50% of the orange crop would cause the orange juice supply curve to shift to the right.
answer
False
question
Rational people make decisions by comparing marginal benefits and marginal costs, with the goal that marginal cost (MC) does not exceed marginal benefit (MB).
answer
True
question
A decrease in quantity demanded results in a movement downward and to the right along a demand curve.
answer
False
question
Suppose goods X and Y are substitutes for each other. If the price of good Y increases, the result in the market for good X is an increase in the demand for good X.
answer
True
question
Assumptions are necessary to build a good economic model.
answer
True
question
Specialization and trade allow individuals to shift their PPFs outward.
answer
False
question
In the model of supply and demand, a characteristic of equilibrium is 𝑄𝑆 =𝑄𝐷.
answer
True
question
In the model of supply and demand, when demand decreases, we can also characterize this change to the market as a decrease in quantity supplied.
answer
True
question
What can be said about scarcity?
answer
Scarcity forces us to make choices.
question
Two of the five foundations of economics are closely related topics. ____ exists when a decision-maker has to choose a course of action that prevents him or her from being able to take another course of action, but _____ explains what you give up when you choose to buy a new pair of shoes instead of attending a concert.
answer
A trade-off; an opportunity cost
question
The curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price is the
answer
Demand curve
question
The opportunity cost of buying a good is
answer
The value of the next-best alternative you could have purchased
question
A shift in the supply curve might be caused by a change in
answer
Production technology
Input prices
Expectations about future prices
Input prices
Expectations about future prices
question
Suppose the price of good X increases. In terms of demand, what is the result?
answer
The quantity demanded of X decreases.
question
Which of the following simultaneous events must cause equilibrium price to fall?
answer
Demand decreases and supply increases
question
Which of the following is a positive statement?
a. Congress should increase the legal minimum wage to decrease excessive profits.
b. An increase in the legal minimum wage is a good idea.
c. An increase in the legal minimum wage would cause the level of unemployment to decline.
d. The minimum wage should be increased so that the poor will have a better life.
a. Congress should increase the legal minimum wage to decrease excessive profits.
b. An increase in the legal minimum wage is a good idea.
c. An increase in the legal minimum wage would cause the level of unemployment to decline.
d. The minimum wage should be increased so that the poor will have a better life.
answer
C
question
Equilibrium price must increase when demand
answer
Increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases simultaneously
question
___________ and specialization make it possible to achieve gains from trade between individuals, firms, or nations.
answer
Comparative Advantage
question
Assume the market for extra-long twin mattresses is in equilibrium. There is a sudden decrease in income throughout the economy. Ceteris Paribus, we would expect that if extra-long twin mattresses are a(n) ________ good, then the demand curve will shift to the ________, causing the equilibrium price and quantity to ________.
answer
Normal; left; fall
question
The difference between production possibilities curves that are bowed out and those that are straight lines is that
answer
Bowed-out production possibilities curves illustrate increasing opportunity cost, whereas straight-line production possibilities curves illustrate constant opportunity cost.
question
In an hour, Julie can sew 2 scarves or make 7 candles, and Cindy can sew 6 scarves or make 4 candles. Who has the absolute advantage in sewing scarves, and who has the absolute advantage in making candles?
answer
Julie in making candles, Cindy in sewing scarves
question
The overriding reason why households and societies face many decisions is that
answer
Resources are scarce.
question
Economics is the study of
answer
How to allocate scare resources to satisfy virtually unlimited wants and needs
question
The quantity demanded of a good is the amount that buyers are
answer
Willing and able to purchase
question
The principle of comparative advantage states that
answer
Each good should be produced by the individual that has the smaller opportunity cost of producing that good
question
Companies use advertising to shift consumer demand. On which of the following demand shifters do advertisers most often rely?
answer
Changes in tastes and preferences
question
At the price of $5 per pack of batteries, Duracell sells 10,000 packs of batteries and Energizer sells 15,000 packs of batteries. When the price rises to $7.50, Duracell sells 12,000 packs of batteries and Energizer sells 16,000 packs of batteries. What is the market supply at $7.50?
answer
28,000...at $7.50: 12,000 + 16,000 = 28,000
question
Which of the following would shift a farmer's Production Possibilities Frontier towards the origin?
answer
A hurricane
question
In a supply and demand framework, when the price is set below the equilibrium price, a __________ will occur. This puts ________ pressure on the price in order for the market to reach equilibrium.
answer
Shortage; upward
question
A competitive market is a market in which
answer
no individual buyer or seller has any significant impact on the market price.
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