question
If people act as if they systematically pursue their own self-interest, then they will most likely
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respond predictably to a given incentive
question
To enhance their prestige, some country clubs like to point to the fact that they have a waiting list for new members. Even at clubs with high initiation fees, it is common that prospective members have to wait for three or more years before there is room. How do these country clubs set the price of membership to ensure that they have a waiting list?
answer
set the membership price below the market clearing price
question
Which of the following describes a problem with the labor theory of value?
answer
it suffers from circular reasoning because labor itself has a price
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Which of the following is most likely to generate a surplus?
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a price floor
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Which of the following is an example of an application of the ceteris paribus assumption?
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an analysis of how price changes affect how much of a good people will purchase when all other factors are held constant
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Which of the following is an example of a positive economic statement?
answer
If payroll taxes are raised , then the Social Security crisis will be resolved
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The theory that people will exchange one good for another when they value the goods equally is called:
answer
The exchange of equivalents theory
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According to economists, when two people make exactly the opposite decision
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each person evaluates the situation according to his/her individual self-interest
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The face value of money or income is call its ______ value
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nominal
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the real value of money
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reflects the purchasing power of money
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A minimum wage is an example of a
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price floor
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In which of the following situations will market clearing price decrease and the equilibrium quantity increase?
answer
an increase in supply with no change in demand
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In a free market, the market clearing price and quantity in the above figure will adjust to
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$2 per gallon and 30 million gallons
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The mercantilists promoted the idea that a "public interest" existed separately from individual people. Which of the following ideas does this contradict?
answer
Methodological individualism
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What led the Classical economists to reject the subjective theory of price?
answer
The water-diamonds paradox
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Income Elasticity relates to
answer
a horizontal shift in the demand curve
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diminshing marginal utility sets in after the _______ soda per day.
answer
first
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opportunity cost
answer
is always the value of the next best forgone opportunity
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When the calculated price elasticity of demand is -0.45, demand is
answer
inelastic
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suppose that when the price of milk rises 20%, the quantity demanded of milk falls 10% . Based on this information, what is the approximate absolute price elasticity of demand for milk?
answer
0.5
question
If a price ceiling is set above the market clearing price, then
answer
quantity demanded will remain equal to quantity supplied at the current market clearing price
question
An increase in the minimum wage will tend to cause which of the following to occur?
answer
an increase in the size of the surplus of labor
question
the price elasticity of demand measures
answer
the responsiveness of the quantity demanded to changes in price
question
suppose that the amount of computer printers demanded increases by 20 percent when the price of personal computers falls by 10 percent. The cross price elasticity of demand between computer printers and personal computers is
answer
-2.0
question
a maximum legal price that may be charged for a particular good or service is known as a
answer
price ceiling
question
Cteteris paribus, as the price of a good or service increases
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people will buy less of it
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Roses are more expensive on Valentine's Day than at other times of the year, yet sales of roses are highest on that day. How does economic theory account for this?
answer
An increase in demand pushes up the market clearing price of roses
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an increase in the equilibrium quantity of good X can be caused by
answer
a technological improvement in the process of producing good X.
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If other factors remain unchanged, technologies progress in producing good x definitely will lead to
answer
a decrease in the market clearing price of good x and an increase in the equilibrium quantity of good x
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Which of the following is an example of a normative statement?
answer
a camera makes a good wedding gift
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the theory that the price of good is determined by its cost of production is called:
answer
the labor theory of value
question
price floors are designed to
answer
establish a minimum allowable price
question
if the cross price elasticity of demand between Los Angeles professional basketball tickets and Los Angeles Dodgers professional baseball tickets is positive the two goods are
answer
substitutes
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Which panel demonstrates the law of demand
answer
line decreasing left to right
question
From 8 to 10, Susan can attend a movie, study, or talk with friends. Suppose that Susan decides to go to the movie but thinks that, if she hadnt, she would otherwise have talked with friends. The opportunity cost of attending the movie is
answer
Talking with friendds
question
Rent controls often have adverse effects, including
answer
deterioration in the quality of existing rental unity
question
If price increases and the quantity purchased increases, we know that
answer
demand increases
question
A value of the absolute price elasticity of demand equal to 0.5 indicates that
answer
a 1% increase in price leads to a 0.5% decrease in quantity demand
question
If a price ceiling is set above the current market clearing price, then
answer
quantity demanded will remain equal to quantity supplied at the current market clearing price
question
Suppose the market clearing price for gasoline is $4.75 per gallon. Now suppose that policy makers pass a law requiring that the maximum price that can be charged is $3.75 per gallon. Such a situation is an example of
answer
a price ceiling that will lead to a shortage of gasoline on the market
question
Which of the following statements is true with scarcity?
answer
scarcity refers to the situation in which unlimited wants exceed limited resources
question
Which of the following is a problem with the Exchange of Equivalents theory of prices?
answer
If people value two goods equally, there nothing to be gained by exchanging them
question
The law of demand states that
answer
the quantity demanded of a good is higher at a lower relative price than at a higher relative price
question
The Just Price Theory holds that there is a single price at which each good should be sold. This is:
answer
an example of normative analysis
question
Rent controls are an example of a
answer
price ceiling
question
Which of the following would likely be considered as falling into the domain of microeconomics?
answer
the price of apples
question
Which of the following is a positive economic statement?
answer
the rate of unemployment of young African-Americans exceeds that of white Americans
question
Which of the following describes a problem with the labor theory of price?
answer
it suffers from the circular reasoning because labor itself has a price
question
the formula for price elasticity of demand is
answer
percentage change in quantity demanded/percentage change in price
question
Holding supply constant, a reduction in demands leads to
answer
lower prices and lower quantity supplied
question
according to the law of demand, an increase in the price of a good causes
answer
an upward movement along the demand curve for that good
question
a perfectly horizontal demand curve has
answer
perfect elasticity
question
The author of the book An Inquiry into the Nature and Causes of the Wealth of Nations is
answer
Adam Smith
question
Holding supply constant, a reduction in demand leads to
answer
lower prices and lower quantity supplied
question
In an extreme hypothetical instance in which the price change of a good elicited no change in quantity demanded, we would say that the item is
answer
perfectly inelastic
question
Economists assume that people are motivated by
answer
rational self-interest
question
the face value of money or income is called its ___ value
answer
nominal
question
A value of the absolute price elasticity of demand equal to 0.6 indicates that
answer
a 10 percent increase in price leads to a 6 percent decrease in quantity demanded
question
Assume that the market clearing price for a shirt is $20, but the maximum price that can be charged is $15. This is an example of
answer
a price ceiling that will likely lead to a shortage of shirts on the market
question
According to the law of demand, other things being equal,
answer
when the price a good goes up, then people buy less of a good
question
Who benefits primarily from rents controls?
answer
only renters who are able to get units at below-market rates
question
If one's demand for peanut butter decreases as income rises, the income elasticity of demand for the product is
answer
negative
question
The theory that the price of a good is determined as income rises , the income elasticity of demand for the
answer
the labor theory of value
question
If a price ceiling is set above the current market clearing, then
answer
quantity demanded will remain equal to quantity supplied at the current market clearing price
question
If price increases and the quantity purchased increases, we know that
answer
demand increased
question
both the social sciences and the natural sciences employ ______ to help them understand the world around them
answer
theories
question
The diamond/water paradox states that things with the _____ value in use frequently have ______ value exchange
answer
greatest; little or no
question
How are the fundamental economic decisions determined in North Korea?
answer
the government decides because North Korea is a centrally planned economy
question
The formula for price elasticity of demand is
answer
the percentage change in quantity demanded divided by the percentage change in price
question
Which of the following statements about demand and price elasticity of demand is TRUE?
answer
As the demand curve has a negative slope, the price elasticity of demand is negative
question
"All Americans should have access to health care" is an example of
answer
a normative statement
question
In production of goods and services, trade-off exist because
answer
society has only a limited amount of productive resources
question
The law of demand includes the statement "other things being equal." These other things include all of the following EXCEPT
answer
the price of that good in law of demand
question
A minimum wage is an example of a
answer
price floor
question
The reason it is important to understand the difference between the "real" and "nominal" values of money is:
answer
what matters to people is the purchasing power of money or income.
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