question
Economics is the study of
answer
Scarcity
question
Scarcity means that-
A) We must find ways to deal with that scarcity.
B) We must make choices and give up things we really want.
C) Figure out the best set of social systems to address scarcity.
D) All of the above.
E) A and B above.
A) We must find ways to deal with that scarcity.
B) We must make choices and give up things we really want.
C) Figure out the best set of social systems to address scarcity.
D) All of the above.
E) A and B above.
answer
D. All of the above.
question
When trying to assess your economic well-being you should-
A) Compare your situation to that of most of the people alive today.
B) Compare yourself to Donald Trump.
C) Compare yourself to your neighbors.
D) Compare yourself to your parents.
E) Not compare yourself to others because that is foolish.
A) Compare your situation to that of most of the people alive today.
B) Compare yourself to Donald Trump.
C) Compare yourself to your neighbors.
D) Compare yourself to your parents.
E) Not compare yourself to others because that is foolish.
answer
A) Compare your situation to that of most of the people alive today.
question
In which of the following ways did the video not indicate you were rich compared to King George?
A) Indoor plumbing
B) Travel
C) Music
D) Power
E) Medical treatment
A) Indoor plumbing
B) Travel
C) Music
D) Power
E) Medical treatment
answer
D) Power
question
Economics studies-
A) Scarcity.
B) The social institutions used to address scarcity.
C) How much to produce, how to produce it, and who gets it.
D) A and C above.
E) All of the above.
A) Scarcity.
B) The social institutions used to address scarcity.
C) How much to produce, how to produce it, and who gets it.
D) A and C above.
E) All of the above.
answer
E) All of the above.
question
Economics teaches us that people-
A) Fundamentally do not care about others in society.
B) Fundamentally want more goods and that is the best way to behave.
C) Fundamentally want more goods and that is unfortunate, but real.
D) Fundamentally want more goods.
E) A and B above.
A) Fundamentally do not care about others in society.
B) Fundamentally want more goods and that is the best way to behave.
C) Fundamentally want more goods and that is unfortunate, but real.
D) Fundamentally want more goods.
E) A and B above.
answer
D) Fundamentally want more goods.
question
The three fundamental questions that must be answered by any economy include:
A) How much to produce, why goods are produced, and who gets the goods.
B) Why to produce particular goods, how to produce them, and who gets them.
C) How much to produce, how to produce goods, and who gets the goods.
D) How to produce goods, why to produce them, and who gets them.
E) Why to produce goods, how to produce them, and who gets them.
A) How much to produce, why goods are produced, and who gets the goods.
B) Why to produce particular goods, how to produce them, and who gets them.
C) How much to produce, how to produce goods, and who gets the goods.
D) How to produce goods, why to produce them, and who gets them.
E) Why to produce goods, how to produce them, and who gets them.
answer
C) How much to produce, how to produce goods, and who gets the goods.
question
Which of the following can be established using economic analysis?
A) People should work on teams to produce things because there is more job satisfaction.
B) Products should be made more reliably.
C) The government should not be the entity to choose the amounts of goods and services provided.
D) None of the above can be established through economic analysis.
E) All of the above can be established through economic analysis.
A) People should work on teams to produce things because there is more job satisfaction.
B) Products should be made more reliably.
C) The government should not be the entity to choose the amounts of goods and services provided.
D) None of the above can be established through economic analysis.
E) All of the above can be established through economic analysis.
answer
E) All of the above can be established through economic analysis.
question
Which of the following is not an example of the economic question of what to produce?
A) Should we urbanize farmland?
B) What is the best type of cell phone?
C) How much should we recycle?
D) Should we make breakfast tacos or waffles?
D) Should we make SUVs or all electric vehicles?
A) Should we urbanize farmland?
B) What is the best type of cell phone?
C) How much should we recycle?
D) Should we make breakfast tacos or waffles?
D) Should we make SUVs or all electric vehicles?
answer
B) What is the best type of cell phone?
question
Hunter-gatherer societies allocated resources by a combination of-
A) Individual decisions.
B) Sharing customs.
C) Organized activity
D) All of the above.
E) A and B above.
A) Individual decisions.
B) Sharing customs.
C) Organized activity
D) All of the above.
E) A and B above.
answer
D) All of the above.
question
Trade-
A) Only emerged in about 1,000 B.C.
B) Only emerged once markets became established.
C) Has been a feature of nearly all economies.
D) Only came into existence when markets developed.
E) None of the above.
A) Only emerged in about 1,000 B.C.
B) Only emerged once markets became established.
C) Has been a feature of nearly all economies.
D) Only came into existence when markets developed.
E) None of the above.
answer
C) Has been a feature of nearly all economies.
question
Central control of economies-
A) Emerged with governments.
B) Regulated resources like land and water.
C) Emerged when early civilizations came into existence.
D) Was absent when society consisted of just prehistoric clans.
E) None of the above.
A) Emerged with governments.
B) Regulated resources like land and water.
C) Emerged when early civilizations came into existence.
D) Was absent when society consisted of just prehistoric clans.
E) None of the above.
answer
B) Regulated resources like land and water
question
A hunter-gatherer society
A) Is a notable exception to the general proposition that all societies must answer the question of what to produce.
B) Is a notable exception to the general proposition that all societies must answer the question of how to produce it.
C) Is a notable exception to the general proposition that all societies must answer the question of who gets it.
D) All of the above.
E) None of the above.
A) Is a notable exception to the general proposition that all societies must answer the question of what to produce.
B) Is a notable exception to the general proposition that all societies must answer the question of how to produce it.
C) Is a notable exception to the general proposition that all societies must answer the question of who gets it.
D) All of the above.
E) None of the above.
answer
E) None of the above.
question
Advantages of trade include that-
A) It permits specialization.
B) It permits people some people to produce more than they consume.
C) It takes advantage of comparative advantage.
D) All of the above.
E) A and C above.
A) It permits specialization.
B) It permits people some people to produce more than they consume.
C) It takes advantage of comparative advantage.
D) All of the above.
E) A and C above.
answer
D) All of the above.
question
Which of the following is not an economic question:
A) Do we have enough medical care in the economy?
B) Should we recycle more?
C) Should we make hybrids or SUVs?
D) Is it better for stores to close on Sundays?
E) All of the above are economic questions.
A) Do we have enough medical care in the economy?
B) Should we recycle more?
C) Should we make hybrids or SUVs?
D) Is it better for stores to close on Sundays?
E) All of the above are economic questions.
answer
D) Is it better for stores to close on Sundays?
question
Adam Smith's book, the Wealth of Nations, investigated-
A) The factors affecting economic wealth across countries.
B) The role of wealth played in social well-being.
C) The role of custom in the economy.
D) The role of markets in determining economic efficiency.
E) All of the above.
A) The factors affecting economic wealth across countries.
B) The role of wealth played in social well-being.
C) The role of custom in the economy.
D) The role of markets in determining economic efficiency.
E) All of the above.
answer
D) The role of markets in determining economic efficiency.
question
The steps needed to evaluate the best way to organize an economy include-
A) Determining what will be produced, how it will be produced and who gets it, and then evaluating these outcomes.
B) Determining whether an economy provides free choice, and an appropriate role for government.
C) Determining what will be produced, how it will be produced and who gets it, and then limiting the role of government.
D) Limiting central power and making the maximum use of markets.
E) C and D above.
A) Determining what will be produced, how it will be produced and who gets it, and then evaluating these outcomes.
B) Determining whether an economy provides free choice, and an appropriate role for government.
C) Determining what will be produced, how it will be produced and who gets it, and then limiting the role of government.
D) Limiting central power and making the maximum use of markets.
E) C and D above.
answer
A) Determining what will be produced, how it will be produced and who gets it, and then evaluating these outcomes.
question
The key advantage of market exchange compared to one-on-one (barter) trade is that-
A) Markets use money, which is generally better.
B) Barter limits trades because each person must want what the other one has.
C) Markets are more efficient.
D) All of the above.
E) A and B above.
A) Markets use money, which is generally better.
B) Barter limits trades because each person must want what the other one has.
C) Markets are more efficient.
D) All of the above.
E) A and B above.
answer
C) Markets are more efficient.
question
A major question that faced societies 250 years ago was-
A) What would happen if you organized more of the economy with guilds.
B) What would happen if you organized more of the economy with markets.
C) What would happen if you organized more of the economy with government.
D) Was there enough BlueBell?
E) A, B, and C above.
A) What would happen if you organized more of the economy with guilds.
B) What would happen if you organized more of the economy with markets.
C) What would happen if you organized more of the economy with government.
D) Was there enough BlueBell?
E) A, B, and C above.
answer
B) What would happen if you organized more of the economy with markets.
question
Adam Smith's Invisible Hand Theorem indicates that competitive markets are efficient because:
A) Competitive markets ensure efficient amounts of each good, produce that good at least cost, and allocate the good among consumers in the best way possible.
B) Competitive markets ensure efficient amounts of each good and produce that good at least cost
C) Competitive markets allocate goods to consumers in the best possible way, ensure least cost production, and use prices to generate the equilibrium.
D) Competitive markets ensure production by the least cost sellers, and are generally better than government.
E) A and B above.
A) Competitive markets ensure efficient amounts of each good, produce that good at least cost, and allocate the good among consumers in the best way possible.
B) Competitive markets ensure efficient amounts of each good and produce that good at least cost
C) Competitive markets allocate goods to consumers in the best possible way, ensure least cost production, and use prices to generate the equilibrium.
D) Competitive markets ensure production by the least cost sellers, and are generally better than government.
E) A and B above.
answer
A) Competitive markets ensure efficient amounts of each good, produce that good at least cost, and allocate the good among consumers in the best way possible.
question
When buyers and sellers operate in a competitive market, they are-
A) Following their own self-interest, doing whatever serves them best.
B) Following their own self-interest, but wanting the economy to operate efficiently.
C) Trying to ensure that markets work.
D) Trying to take advantage of the other person.
E) A and C above.
A) Following their own self-interest, doing whatever serves them best.
B) Following their own self-interest, but wanting the economy to operate efficiently.
C) Trying to ensure that markets work.
D) Trying to take advantage of the other person.
E) A and C above.
answer
A) Following their own self-interest, doing whatever serves them best.
question
When people invest in a business, those investments-
A) Are efficient if the government backs the investment.
B) Are efficient if they prove to be successful.
C) Are efficient if they are investing their own money.
D) Are often inefficient because they don't work out.
E) B and C above.
A) Are efficient if the government backs the investment.
B) Are efficient if they prove to be successful.
C) Are efficient if they are investing their own money.
D) Are often inefficient because they don't work out.
E) B and C above.
answer
C) Are efficient if they are investing their own money.
question
When sellers sell goods in a market they are doing so because-
A) They are trying to get to the efficient market solution.
B) They want the economy to function well, so they can contribute to social welfare.
C) They can make more money selling that good than doing something else.
D) A and B above.
E) A and C above.
A) They are trying to get to the efficient market solution.
B) They want the economy to function well, so they can contribute to social welfare.
C) They can make more money selling that good than doing something else.
D) A and B above.
E) A and C above.
answer
C) They can make more money selling that good than doing something else.
question
If you have a competitive equilibrium for a two market economy consisting of tacos and enchiladas then-
A) The market equilibrium quantity of tacos is efficient.
B) The market equilibrium quantity of enchiladas is efficient.
C) The sellers of tacos have higher costs than other potential sellers.
D) All of the above.
E) A and B above.
A) The market equilibrium quantity of tacos is efficient.
B) The market equilibrium quantity of enchiladas is efficient.
C) The sellers of tacos have higher costs than other potential sellers.
D) All of the above.
E) A and B above.
answer
E) A and B above.
question
Which of the following can be derived from other assumptions about numbers?
A) Subtraction.
B) Multiplication.
C) Division
D) All of the above.
E) B and C above.
A) Subtraction.
B) Multiplication.
C) Division
D) All of the above.
E) B and C above.
answer
D) All of the above.
question
Which of the following can be derived from other assumptions of economics?
A) Scarcity.
B) Tradeoffs.
C) Opportunity costs.
D) B and C above.
E) A and B above.
A) Scarcity.
B) Tradeoffs.
C) Opportunity costs.
D) B and C above.
E) A and B above.
answer
D) B and C above.
question
Which of the following are assumptions needed for simple arithmetic?
A) Numbers exist.
B) Multiplication.
C) Addition.
D) All of the above.
E) A and C above.
A) Numbers exist.
B) Multiplication.
C) Addition.
D) All of the above.
E) A and C above.
answer
E) A and C above.
question
Using basic assumptions you can determine-
A) Why markets are efficient.
B) When markets are efficient.
C) When government intervention helps or hurts economic performance.
D) All of the above.
E) A and B above.
A) Why markets are efficient.
B) When markets are efficient.
C) When government intervention helps or hurts economic performance.
D) All of the above.
E) A and B above.
answer
D) All of the above.
question
The video describes the steps in simple arithmetic as proceeding from-
A) Numbers to cardinal numbers to addition to subtraction to division to multiplication.
B) Numbers to addition to subtraction to division to multiplication.
C) Numbers to cardinal numbers to addition to subtraction to multiplication to division.
D) Cardinal numbers to numbers to addition to multiplication to subtraction to division.
E) None of the above.
A) Numbers to cardinal numbers to addition to subtraction to division to multiplication.
B) Numbers to addition to subtraction to division to multiplication.
C) Numbers to cardinal numbers to addition to subtraction to multiplication to division.
D) Cardinal numbers to numbers to addition to multiplication to subtraction to division.
E) None of the above.
answer
C) Numbers to cardinal numbers to addition to subtraction to multiplication to division.
question
The revenue received from the sale of ________ of a product is a marginal benefit to the firm.
A) an additional unit
B) no units
C) the total number of units
D) only profitable units
A) an additional unit
B) no units
C) the total number of units
D) only profitable units
answer
A) an additional unit
question
Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles. These consumers who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that-
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
answer
B) people respond to economic incentives.
question
The extra cost associated with undertaking an activity is called-
A) opportunity cost.
B) foregone cost.
C) marginal cost.
D) net loss.
A) opportunity cost.
B) foregone cost.
C) marginal cost.
D) net loss.
answer
C) marginal cost.
question
In economics, the term ________ means "additional" or "extra."
A) equity
B) marginal
C) optimal
D) allocative
A) equity
B) marginal
C) optimal
D) allocative
answer
B) Marginal
question
Making "how much" decisions involves-
A) calculating the total benefits of the activity and determining if you are satisfied with that amount.
B) calculating the total costs of the activity and determining if you can afford to incur that expenditure.
C) calculating the average benefit and the average cost of an activity to determine if it is worthwhile undertaking that activity.
D) determining the additional benefits and the additional costs of that activity.
A) calculating the total benefits of the activity and determining if you are satisfied with that amount.
B) calculating the total costs of the activity and determining if you can afford to incur that expenditure.
C) calculating the average benefit and the average cost of an activity to determine if it is worthwhile undertaking that activity.
D) determining the additional benefits and the additional costs of that activity.
answer
D) determining the additional benefits and the additional costs of that activity.
question
When voluntary exchange takes place, both parties gain from the exchange.
True or False?
True or False?
answer
True
question
The highest valued alternative that must be given up to engage in an activity is the definition of-
A) opportunity cost
B) marginal cost
C) marginal benefit
D) economic equity
A) opportunity cost
B) marginal cost
C) marginal benefit
D) economic equity
answer
A) opportunity cost
question
The principle of opportunity cost is that-
A) the economic cost of using a factor of production is the alternative use of that factor that is given up.
B) the cost of production varies depending on the opportunity for technological application.
C) the economic cost of using a factor of production is the alternative use of that factor that is given up.
D) in a market economy, taking advantage of profitable opportunities involves some money cost.
E) taking advantage of investment opportunities involves costs.
A) the economic cost of using a factor of production is the alternative use of that factor that is given up.
B) the cost of production varies depending on the opportunity for technological application.
C) the economic cost of using a factor of production is the alternative use of that factor that is given up.
D) in a market economy, taking advantage of profitable opportunities involves some money cost.
E) taking advantage of investment opportunities involves costs.
answer
C) the economic cost of using a factor of production is the alternative use of that factor that is given up.
question
The opportunity cost of going to an outdoor music festival is-
A) equal to the highest value of an alternative use of the time and money spent on the festival.
B) the cost of the festival ticket only.
C) the value of the time spent at the festival.
D) zero because there are no overhead costs for an outdoor festival.
E) the enjoyment you receive from going to the festival.
A) equal to the highest value of an alternative use of the time and money spent on the festival.
B) the cost of the festival ticket only.
C) the value of the time spent at the festival.
D) zero because there are no overhead costs for an outdoor festival.
E) the enjoyment you receive from going to the festival.
answer
A) equal to the highest value of an alternative use of the time and money spent on the festival.
question
Economists assume that the goal of consumers is to-
A) consume as much as possible.
B) do as little work as possible to survive.
C) spend all their income.
D) make themselves as well off as possible.
A) consume as much as possible.
B) do as little work as possible to survive.
C) spend all their income.
D) make themselves as well off as possible.
answer
D) make themselves as well off as possible.
question
By definition, economics is the study of-
A) how to make money in the stock market.
B) how to make money in a market economy.
C) the choices people make to attain their goals, given their scarce resources.
D) supply and demand
A) how to make money in the stock market.
B) how to make money in a market economy.
C) the choices people make to attain their goals, given their scarce resources.
D) supply and demand
answer
C) the choices people make to attain their goals, given their scarce resources.
question
Marginal utility is the-
A) satisfaction achieved when a consumer has had enough of a product.
B) total satisfaction received from consuming a given number of units of a product.
C) extra satisfaction received from consuming one more unit of a product.
D) average satisfaction received from consuming a product.
A) satisfaction achieved when a consumer has had enough of a product.
B) total satisfaction received from consuming a given number of units of a product.
C) extra satisfaction received from consuming one more unit of a product.
D) average satisfaction received from consuming a product.
answer
C) extra satisfaction received from consuming one more unit of a product.
question
Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that-
A) people with health insurance are more likely to be overweight than people without health insurance.
B) people with health insurance are less likely to be overweight than people without health insurance.
C) there is no correlation between having health insurance and being overweight.
D) people with health insurance are equally likely to be overweight as people without health insurance.
A) people with health insurance are more likely to be overweight than people without health insurance.
B) people with health insurance are less likely to be overweight than people without health insurance.
C) there is no correlation between having health insurance and being overweight.
D) people with health insurance are equally likely to be overweight as people without health insurance.
answer
A) people with health insurance are more likely to be overweight than people without health insurance.
question
Economists assume that rational people do all of the following except-
A) use all available information as they act to achieve their goals.
B) respond to economic incentives.
C) undertake activities that benefit others and hurt themselves.
D) weigh the benefits and costs of all possible alternative actions.
A) use all available information as they act to achieve their goals.
B) respond to economic incentives.
C) undertake activities that benefit others and hurt themselves.
D) weigh the benefits and costs of all possible alternative actions.
answer
C) undertake activities that benefit others and hurt themselves.
question
Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.
A) rationally
B) equitably
C) selfishly
D) emotionally
A) rationally
B) equitably
C) selfishly
D) emotionally
answer
A) rationally
question
Economists assume that individuals-
A) are rational and respond to incentives.
B) will never take actions to help others.
C) prefer to live in a society that values fairness above all else.
D) behave in unpredictable ways
A) are rational and respond to incentives.
B) will never take actions to help others.
C) prefer to live in a society that values fairness above all else.
D) behave in unpredictable ways
answer
A) are rational and respond to incentives.
question
An item has utility for a consumer if it-
A) generates enjoyment or satisfaction.
B) is something everyone else wants.
C) has a high price.
D) is scarce.
A) generates enjoyment or satisfaction.
B) is something everyone else wants.
C) has a high price.
D) is scarce.
answer
A) generates enjoyment or satisfaction.
question
Economists assume that rational behavior is useful in explaining choices people make-
A) because irrational people do not make economic choices.
B) even though people may not behave rationally all the time.
C) even though people rarely, if ever, behave in a rational manner.
D) because individuals act rationally all the time in all circumstances.
A) because irrational people do not make economic choices.
B) even though people may not behave rationally all the time.
C) even though people rarely, if ever, behave in a rational manner.
D) because individuals act rationally all the time in all circumstances.
answer
B) even though people may not behave rationally all the time.
question
Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and therefore choose to invest in foreign markets. By using all available information as they act to achieve their goals, these investors are exemplifying the economic idea that-
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency
answer
A) people are rational.
question
Which of the following is a positive economic statement?
A) People should not buy SUVs.
B) The government should mandate electric
automobiles.
C) Scarcity necessitates that people make trade-offs.
D) Foreign workers should not be allowed to work for lower wages than the citizens of a country.
A) People should not buy SUVs.
B) The government should mandate electric
automobiles.
C) Scarcity necessitates that people make trade-offs.
D) Foreign workers should not be allowed to work for lower wages than the citizens of a country.
answer
C) Scarcity necessitates that people make trade-offs.
question
Which of the following is a positive economic statement?
A) Raising the tax on gasoline raises the selling price of gasoline.
B) The government should ban the production and sale of incandescent light bulbs.
C) The government should revamp its immigration policies.
D) U.S. citizens should only buy products which are produced in the United States
A) Raising the tax on gasoline raises the selling price of gasoline.
B) The government should ban the production and sale of incandescent light bulbs.
C) The government should revamp its immigration policies.
D) U.S. citizens should only buy products which are produced in the United States
answer
A) Raising the tax on gasoline raises the selling price of gasoline.
question
Which of the following is a normative economic statement?
A) Rising global demand for coal has led to increases in the price of coal.
B) Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.
C) With rising mortgage rates and rising unemployment rates, the number of unsold homes has increased.
D) The state of Texas is considering increasing funds for light-rail development to promote the use of public transportation.
A) Rising global demand for coal has led to increases in the price of coal.
B) Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.
C) With rising mortgage rates and rising unemployment rates, the number of unsold homes has increased.
D) The state of Texas is considering increasing funds for light-rail development to promote the use of public transportation.
answer
B) Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.
question
Which of the following is a positive economic statement?
A) If the price of iPhones falls, a larger quantity of iPhones will be purchased.
B) The U.S. government should not have bailed out U.S. auto manufacturers.
C) The standard of living in the United States should be higher.
D) The government should revamp the health care system.
A) If the price of iPhones falls, a larger quantity of iPhones will be purchased.
B) The U.S. government should not have bailed out U.S. auto manufacturers.
C) The standard of living in the United States should be higher.
D) The government should revamp the health care system.
answer
A) If the price of iPhones falls, a larger quantity of iPhones will be purchased.
question
Which of the following is a normative economic statement?
A) Farmers should not be allowed to grow and sell genetically-modified crops.
B) The federal government is considering increasing regulations on the use of fossil fuels to promote the use of wind power.
C) Rising corn prices have increased the price of corn-based ethanol.
D) With rising home prices and falling mortgage interest rates, the amount of home foreclosures has decreased.
A) Farmers should not be allowed to grow and sell genetically-modified crops.
B) The federal government is considering increasing regulations on the use of fossil fuels to promote the use of wind power.
C) Rising corn prices have increased the price of corn-based ethanol.
D) With rising home prices and falling mortgage interest rates, the amount of home foreclosures has decreased.
answer
A) Farmers should not be allowed to grow and sell genetically-modified crops.
question
Which of the following is a normative economic statement?
A) The price of wheat is too low.
B) When the price of wheat falls, the cost of wheat-based products falls.
C) When the price of wheat falls, the quantity of wheat purchased rises.
D) The current low price of wheat is the result of increased worldwide supply.
A) The price of wheat is too low.
B) When the price of wheat falls, the cost of wheat-based products falls.
C) When the price of wheat falls, the quantity of wheat purchased rises.
D) The current low price of wheat is the result of increased worldwide supply.
answer
A) The price of wheat is too low.
question
Which of the following is a normative economic statement?
A) The price of gasoline is too high.
B) The current high price of gasoline is the result of strong worldwide demand.
C) When the price of gasoline rises, transportation costs rise.
D) When the price of gasoline rises, the quantity of gasoline purchased falls.
A) The price of gasoline is too high.
B) The current high price of gasoline is the result of strong worldwide demand.
C) When the price of gasoline rises, transportation costs rise.
D) When the price of gasoline rises, the quantity of gasoline purchased falls.
answer
A) The price of gasoline is too high.
question
"An increase in the price of gasoline will increase the demand for hybrid vehicles." This statement is an example of a positive economic statement.
True or False?
True or False?
answer
True
question
Positive analysis is concerned with "what ought to be," while normative analysis is concerned with "what is."
True or False?
True or False?
answer
False
question
Which of the following is a positive economic statement?
A) The U.S. government should increase regulations on the banking industry.
B) If the price of beef falls, a larger quantity of it will be bought.
C) The government should implement a national consumption tax.
D) The standard of living in the United States is too low.
A) The U.S. government should increase regulations on the banking industry.
B) If the price of beef falls, a larger quantity of it will be bought.
C) The government should implement a national consumption tax.
D) The standard of living in the United States is too low.
answer
B) If the price of beef falls, a larger quantity of it will be bought.
question
Economic models do all of the following except-
A) answer economic questions.
B) portray reality in all its minute details.
C) make economic ideas explicit and concrete for use by decision makers.
D) simplify some aspect of economic life.
A) answer economic questions.
B) portray reality in all its minute details.
C) make economic ideas explicit and concrete for use by decision makers.
D) simplify some aspect of economic life.
answer
B) portray reality in all its minute details.
question
________ occurs when the direction of cause and effect is mixed up in a study.
A) Adverse causality
B) Omitted variable bias
C) Limited information bias
D) Reverse causality
A) Adverse causality
B) Omitted variable bias
C) Limited information bias
D) Reverse causality
answer
D) Reverse causality
question
Causation occurs when-
A) change in one variable is the reason for the change in another variable.
B) change in one variable does not cause any change in another variable.
C) two variables tend to move in the same direction.
D) two variables tend to move in opposite directions.
A) change in one variable is the reason for the change in another variable.
B) change in one variable does not cause any change in another variable.
C) two variables tend to move in the same direction.
D) two variables tend to move in opposite directions.
answer
A) change in one variable is the reason for the change in another variable.
question
An omitted variable is a variable that:
A) does not cause other variables in a study to change when it changes.
B) has been left out, and if included, would explain why the variables considered in a study are correlated.
C) is purposely left out as it does not aid an economic analysis.
D) is removed from a study as it can lead to the problem of reverse causality.
A) does not cause other variables in a study to change when it changes.
B) has been left out, and if included, would explain why the variables considered in a study are correlated.
C) is purposely left out as it does not aid an economic analysis.
D) is removed from a study as it can lead to the problem of reverse causality.
answer
B) has been left out, and if included, would explain why the variables considered in a study are correlated.
question
A correlation between two variables implies that:
A) there is a cause-effect relationship between the two variables.
B) when one variable changes, the other variable always changes by exactly the same amount.
C) it is impossible to measure one variable without measuring the other.
D) there is a mutual relationship between both the variables.
A) there is a cause-effect relationship between the two variables.
B) when one variable changes, the other variable always changes by exactly the same amount.
C) it is impossible to measure one variable without measuring the other.
D) there is a mutual relationship between both the variables.
answer
D) there is a mutual relationship between both the variables.
question
Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases:
A) the opportunity cost of buying sweaters decreases.
B) There is no change in the opportunity cost of consuming either good.
C) the opportunity cost of buying sweaters increases.
D) the opportunity cost of buying shirts increases.
A) the opportunity cost of buying sweaters decreases.
B) There is no change in the opportunity cost of consuming either good.
C) the opportunity cost of buying sweaters increases.
D) the opportunity cost of buying shirts increases.
answer
C) the opportunity cost of buying sweaters increases.
question
Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil?
A) A twofold increase in the prices of both pens and pencils
B) An increase in the consumer's income
C) A decrease in the consumer's income
D) A twofold increase in the price of pens and a threefold increase in the price of pencils
A) A twofold increase in the prices of both pens and pencils
B) An increase in the consumer's income
C) A decrease in the consumer's income
D) A twofold increase in the price of pens and a threefold increase in the price of pencils
answer
D) A twofold increase in the price of pens and a threefold increase in the price of pencils
question
A budget constraint-
A) reflects the desire by consumers to increase their income.
B) refers to the limited amount of income available to consumers to spend on goods and services.
C) shows the prices that a consumer chooses to pay for products he consumes.
D) represents the bundles of consumption that make a consumer equally happy.
A) reflects the desire by consumers to increase their income.
B) refers to the limited amount of income available to consumers to spend on goods and services.
C) shows the prices that a consumer chooses to pay for products he consumes.
D) represents the bundles of consumption that make a consumer equally happy.
answer
B) refers to the limited amount of income available to consumers to spend on goods and services.
question
If quantity of milk is measured on the horizontal axis and quantity of juice is measured on the vertical axis, a decrease in the price of milk will cause the budget constraint to:
A) pivot rightward along the vertical axis.
B) shift to the right.
C) pivot rightward along the horizontal axis.
D) shift to the left.
A) pivot rightward along the vertical axis.
B) shift to the right.
C) pivot rightward along the horizontal axis.
D) shift to the left.
answer
C) pivot rightward along the horizontal axis.
question
If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely.
A) demand function
B) budget constraint
C) indifference curve
D) demand schedule
A) demand function
B) budget constraint
C) indifference curve
D) demand schedule
answer
B) budget constraint
question
A budget constraint is a straight line because:
A) a consumer faces a fixed price of both goods that do not change with changes in consumption.
B) the opportunity cost of buying each of the goods changes along the constraint.
C) the tastes and preferences of the consumer change along the constraint.
D) a consumer has a limited money income.
A) a consumer faces a fixed price of both goods that do not change with changes in consumption.
B) the opportunity cost of buying each of the goods changes along the constraint.
C) the tastes and preferences of the consumer change along the constraint.
D) a consumer has a limited money income.
answer
A) a consumer faces a fixed price of both goods that do not change with changes in consumption.
question
A change in the slope of a budget constraint indicates:
A) a change in the consumer's tastes and preferences.
B) a change in the consumer's income.
C) a change in the price of either good without a change in the opportunity cost.
D) a change in the price of either good that causes a change in the opportunity cost.
A) a change in the consumer's tastes and preferences.
B) a change in the consumer's income.
C) a change in the price of either good without a change in the opportunity cost.
D) a change in the price of either good that causes a change in the opportunity cost.
answer
D) a change in the price of either good that causes a change in the opportunity cost.
question
If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to:
A) pivot rightward along the vertical axis.
B) pivot leftward along the vertical axis.
C) pivot rightward along the horizontal axis.
D) pivot leftward along the horizontal axis.
A) pivot rightward along the vertical axis.
B) pivot leftward along the vertical axis.
C) pivot rightward along the horizontal axis.
D) pivot leftward along the horizontal axis.
answer
B) pivot leftward along the vertical axis.
question
A decrease in the price of either good will cause a consumer's budget constraint to:
A) shift rightward.
B) pivot leftward.
C) shift leftward.
D) pivot rightward.
A) shift rightward.
B) pivot leftward.
C) shift leftward.
D) pivot rightward.
answer
D) pivot rightward.
question
The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as-
A) maximizing behavior.
B) economizing behavior.
C) the price constraint.
D) the budget constraint.
A) maximizing behavior.
B) economizing behavior.
C) the price constraint.
D) the budget constraint.
answer
D) the budget constraint.
question
If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely-
A) demand function
B) budget constraint
C) indifference curve
D) demand schedule
A) demand function
B) budget constraint
C) indifference curve
D) demand schedule
answer
B) budget constraint
question
If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to-
A) pivot rightward along the vertical axis.
B) pivot leftward along the horizontal axis.
C) pivot rightward along the horizontal axis.
D) pivot leftward along the vertical axis.
A) pivot rightward along the vertical axis.
B) pivot leftward along the horizontal axis.
C) pivot rightward along the horizontal axis.
D) pivot leftward along the vertical axis.
answer
D) pivot leftward along the vertical axis.
question
Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil?
A) An increase in the consumer's income
B) A decrease in the consumer's income
C) A twofold increase in the prices of both pens and pencils
D) A twofold increase in the price of pens and a threefold increase in the price of pencils
A) An increase in the consumer's income
B) A decrease in the consumer's income
C) A twofold increase in the prices of both pens and pencils
D) A twofold increase in the price of pens and a threefold increase in the price of pencils
answer
D) A twofold increase in the price of pens and a threefold increase in the price of pencils
question
If quantity of milk is measured on the horizontal axis and quantity of juice is measured on the vertical axis, a decrease in the price of milk will cause the budget constraint to:
A) shift to the left.
B) pivot rightward along the vertical axis.
C) shift to the right.
D) pivot rightward along the horizontal axis.
A) shift to the left.
B) pivot rightward along the vertical axis.
C) shift to the right.
D) pivot rightward along the horizontal axis.
answer
D) pivot rightward along the horizontal axis.
question
The slope of a budget constraint represents-
A) the price of the good measured along the horizontal axis.
B) the price of the good measured along the vertical axis.
C) the money income of the consumer.
D) the opportunity cost of one good in terms of another
A) the price of the good measured along the horizontal axis.
B) the price of the good measured along the vertical axis.
C) the money income of the consumer.
D) the opportunity cost of one good in terms of another
answer
D) the opportunity cost of one good in terms of another
question
A budget constraint is a straight line because:
A) the opportunity cost of buying each of the goods changes along the constraint.
B) a consumer faces a fixed price of both goods that do not change with changes in consumption.
C) a consumer has a limited money income.
D) the tastes and preferences of the consumer change along the constraint.
A) the opportunity cost of buying each of the goods changes along the constraint.
B) a consumer faces a fixed price of both goods that do not change with changes in consumption.
C) a consumer has a limited money income.
D) the tastes and preferences of the consumer change along the constraint.
answer
B) a consumer faces a fixed price of both goods that do not change with changes in consumption.
question
A change in the slope of a budget constraint indicates:
A) a change in the consumer's tastes and preferences.
B) a change in the price of either good without a change in the opportunity cost.
C) a change in the price of either good that causes a change in the opportunity cost.
D) a change in the consumer's income.
A) a change in the consumer's tastes and preferences.
B) a change in the price of either good without a change in the opportunity cost.
C) a change in the price of either good that causes a change in the opportunity cost.
D) a change in the consumer's income.
answer
C) a change in the price of either good that causes a change in the opportunity cost.
question
If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint:
A) shifts to the left.
B) shifts to the right.
C) pivots leftward without a change in the intercept on the horizontal axis.
D) pivots rightward without a change in the intercept on the horizontal axis.
A) shifts to the left.
B) shifts to the right.
C) pivots leftward without a change in the intercept on the horizontal axis.
D) pivots rightward without a change in the intercept on the horizontal axis.
answer
C) pivots leftward without a change in the intercept on the horizontal axis.
question
Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases-
A) the opportunity cost of buying shirts increases.
B) the opportunity cost of buying sweaters increases.
C) the opportunity cost of buying sweaters decreases.
D) There is no change in the opportunity cost of consuming either good.
A) the opportunity cost of buying shirts increases.
B) the opportunity cost of buying sweaters increases.
C) the opportunity cost of buying sweaters decreases.
D) There is no change in the opportunity cost of consuming either good.
answer
B) the opportunity cost of buying sweaters increases.
question
The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as-
A) the price constraint.
B) the budget constraint.
C) maximizing behavior.
D) economizing behavior.
A) the price constraint.
B) the budget constraint.
C) maximizing behavior.
D) economizing behavior.
answer
B) the budget constraint.
question
The law of demand implies, holding everything else constant, that as the price of bagels increases-
A) the quantity of bagels demanded will increase.
B) the demand for bagels will increase.
C) the demand for bagels will decrease.
D) the quantity of bagels demanded will decrease
A) the quantity of bagels demanded will increase.
B) the demand for bagels will increase.
C) the demand for bagels will decrease.
D) the quantity of bagels demanded will decrease
answer
D) the quantity of bagels demanded will decrease
question
Which of the following examples best describes the Law of Demand?
A) When the price of tea increased, the quantity demanded of tea decreased.
B) When Alex received a pay hike, his consumption of all goods increased.
C) When the price of Nokia phones increased, the demand for Samsung phones increased.
D) When the price of gasoline increased, the demand for cars fell.
A) When the price of tea increased, the quantity demanded of tea decreased.
B) When Alex received a pay hike, his consumption of all goods increased.
C) When the price of Nokia phones increased, the demand for Samsung phones increased.
D) When the price of gasoline increased, the demand for cars fell.
answer
A) When the price of tea increased, the quantity demanded of tea decreased.
question
The demand schedule for a commodity illustrates how the consumption of a commodity changes with changes in:
A) income.
B) supply.
C) its price.
D) tastes and preferences.
A) income.
B) supply.
C) its price.
D) tastes and preferences.
answer
C) its price.
question
Willingness to pay:
A) is equal to the price of the highest-priced goods in a consumption bundle.
B) is equal to the price of the lowest-priced goods in a consumption bundle.
C) is the highest price that a buyer is willing and able to pay for a unit of good.
D) is the lowest price that a buyer is willing and able to pay for a unit of good
A) is equal to the price of the highest-priced goods in a consumption bundle.
B) is equal to the price of the lowest-priced goods in a consumption bundle.
C) is the highest price that a buyer is willing and able to pay for a unit of good.
D) is the lowest price that a buyer is willing and able to pay for a unit of good
answer
C) is the highest price that a buyer is willing and able to pay for a unit of good.
question
The income effect of an increase in the price of peaches is-
A) the change in the quantity of peaches demanded that results from the effect of the change in price on consumer purchasing power, holding all other factors constant.
B) the change in the quantity of other fruit demanded that results from the impact of the price change on purchasing power, holding all other factors constant.
C) the change in the quantity of peaches demanded that results from the price increase, making peaches more expensive than other fruit, holding constant the effect of the price change on consumer purchasing power.
D) the change in the demand for peaches as a result of the change in the price of peaches, holding all other factors constant.
A) the change in the quantity of peaches demanded that results from the effect of the change in price on consumer purchasing power, holding all other factors constant.
B) the change in the quantity of other fruit demanded that results from the impact of the price change on purchasing power, holding all other factors constant.
C) the change in the quantity of peaches demanded that results from the price increase, making peaches more expensive than other fruit, holding constant the effect of the price change on consumer purchasing power.
D) the change in the demand for peaches as a result of the change in the price of peaches, holding all other factors constant.
answer
A) the change in the quantity of peaches demanded that results from the effect of the change in price on consumer purchasing power, holding all other factors constant.
question
Which of the following describes the substitution effect of a price change?
A) The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
B) The change in quantity demanded of a good that results from the change in the price of a substitute for the good.
C) The change in quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant.
D) The change in demand that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
A) The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
B) The change in quantity demanded of a good that results from the change in the price of a substitute for the good.
C) The change in quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant.
D) The change in demand that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
answer
A) The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
question
The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00. Although her money income had not changed, Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant. Toni's actions are explained by which of the following?
A) income and substitution effects
B) consumption effect
C) price effect
D) income effect only or substitution effect only but not both effects
A) income and substitution effects
B) consumption effect
C) price effect
D) income effect only or substitution effect only but not both effects
answer
A) income and substitution effects
question
The demand curve for most goods is normally:
A) downward sloping.
B) parallel to the horizontal axis.
C) upward sloping.
D) parallel to the vertical axis.
A) downward sloping.
B) parallel to the horizontal axis.
C) upward sloping.
D) parallel to the vertical axis.
answer
A) downward sloping.
question
The Law of Demand states that:
A) the quantity demanded of a commodity varies inversely with the price of the commodity.
B) the demand for a commodity always equals the supply of the commodity.
C) the quantity demanded of a commodity is the same for all consumers in a perfectly competitive market.
D) the demand for a commodity is mostly influenced by consumers' income.
A) the quantity demanded of a commodity varies inversely with the price of the commodity.
B) the demand for a commodity always equals the supply of the commodity.
C) the quantity demanded of a commodity is the same for all consumers in a perfectly competitive market.
D) the demand for a commodity is mostly influenced by consumers' income.
answer
A) the quantity demanded of a commodity varies inversely with the price of the commodity.
question
As the ________ increases, ________.
A) price of a good; its quantity demanded decreases
B) quantity demanded of a good; its price increases
C) quantity demanded of a good; its price decreases
D) price of a good; its quantity demanded increases
A) price of a good; its quantity demanded decreases
B) quantity demanded of a good; its price increases
C) quantity demanded of a good; its price decreases
D) price of a good; its quantity demanded increases
answer
A) price of a good; its quantity demanded decreases
question
________ is the difference between the willingness to pay and the price paid for a good.
A) Consumer surplus
B) Producer surplus
C) Revenue
D) Seller's profit
A) Consumer surplus
B) Producer surplus
C) Revenue
D) Seller's profit
answer
A) Consumer surplus
question
The demand by all the consumers of a given good or service is the ________ for the good or service.
A) quantity demanded
B) law of demand
C) scheduled demand
D) market demand
A) quantity demanded
B) law of demand
C) scheduled demand
D) market demand
answer
D) market demand
question
John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is ________.
A) $10
B) $2
C) $3
D) $2.50
A) $10
B) $2
C) $3
D) $2.50
answer
C) $3
question
If the price of a good increases, ________.
A) the budget constraint shifts to the left
B) the consumer surplus decreases
C) the budget constraint shifts to the right
D) the consumer surplus increases
A) the budget constraint shifts to the left
B) the consumer surplus decreases
C) the budget constraint shifts to the right
D) the consumer surplus increases
answer
B) the consumer surplus decreases
question
We can derive the market demand curve for gold earrings-
A) by adding vertically the quantity demanded of each gold earring consumed at each price.
B) by adding the prices each gold earring consumer is willing to pay for each quantity.
C) only if the tastes of all gold earring consumers are similar.
D) by adding horizontally the individual demand curves of each gold earring consumer
A) by adding vertically the quantity demanded of each gold earring consumed at each price.
B) by adding the prices each gold earring consumer is willing to pay for each quantity.
C) only if the tastes of all gold earring consumers are similar.
D) by adding horizontally the individual demand curves of each gold earring consumer
answer
D) by adding horizontally the individual demand curves of each gold earring consumer
question
If the Apple Watch and the Samsung Gear S2 are considered substitutes, then, other things equal, an increase in the price of the Apple Watch will-
A) increase the quantity demanded for the Gear S2.
B) increase the quantity demanded for the Apple Watch.
C) increase the demand for the Gear S2.
D) decrease the demand for the Apple Watch.
A) increase the quantity demanded for the Gear S2.
B) increase the quantity demanded for the Apple Watch.
C) increase the demand for the Gear S2.
D) decrease the demand for the Apple Watch.
answer
C) increase the demand for the Gear S2.
question
The market for smartwatches has begun to grow, due in part to the success of the Apple Watch. Following the successful launch of the Apple Watch in 2015, companies such as Samsung, Sony, and LG have all developed products to compete with the Apple Watch. The smartwatches introduced to compete with the Apple Watch would be considered-
A) normal goods compared to the Apple Watch.
B) complements to the Apple Watch.
C) inferior goods compared to the Apple Watch.
D) substitutes for the Apple Watch.
A) normal goods compared to the Apple Watch.
B) complements to the Apple Watch.
C) inferior goods compared to the Apple Watch.
D) substitutes for the Apple Watch.
answer
D) substitutes for the Apple Watch.
question
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
A) An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
B) An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve.
C) There is no difference between the two terms; they both refer to a movement downward along a given demand curve.
D) There is no difference between the two terms; they both refer to a shift of the demand curve.
A) An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
B) An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve.
C) There is no difference between the two terms; they both refer to a movement downward along a given demand curve.
D) There is no difference between the two terms; they both refer to a shift of the demand curve.
answer
A) An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
question
If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, economists would describe this as-
A) a decrease in demand.
B) a decrease in quantity demanded.
C) a decrease in consumers' taste for chocolate.
D) a change in consumer income.
A) a decrease in demand.
B) a decrease in quantity demanded.
C) a decrease in consumers' taste for chocolate.
D) a change in consumer income.
answer
B) a decrease in quantity demanded.
question
When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to-
A) the income effect.
B) the substitution effect.
C) the elasticity effect.
D) the deadweight loss effect.
A) the income effect.
B) the substitution effect.
C) the elasticity effect.
D) the deadweight loss effect.
answer
A) the income effect.
question
Which of the following pairs of goods are likely to be considered complements?
A) Motorcycles and typewriters
B) Nokia and Samsung cell phones
C) Pens and writing pads
D) Laptops and electric heaters
A) Motorcycles and typewriters
B) Nokia and Samsung cell phones
C) Pens and writing pads
D) Laptops and electric heaters
answer
C) Pens and writing pads
question
The substitution effect of an increase in the price of Raisin Bran refers to-
A) the fact that the higher price of Raisin Bran lowers consumer's purchasing power, holding money income constant.
B) the decrease in the demand for Raisin Bran when its price rises.
C) the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left.
D) the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, causes consumers to buy less Raisin Bran
A) the fact that the higher price of Raisin Bran lowers consumer's purchasing power, holding money income constant.
B) the decrease in the demand for Raisin Bran when its price rises.
C) the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left.
D) the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, causes consumers to buy less Raisin Bran
answer
D) the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, causes consumers to buy less Raisin Bran
question
An inferior good is a good for which the quantity demanded decreases as the price increases, holding everything else constant.
True or False?
True or False?
answer
False
question
When the price of summer tank tops falls and you buy more of them because they are relatively less expensive, this is called-
A) the substitution effect.
B) the income effect.
C) the deadweight loss effect.
D) the elasticity effect.
A) the substitution effect.
B) the income effect.
C) the deadweight loss effect.
D) the elasticity effect.
answer
A) the substitution effect.
question
Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are:
A) complements in consumption.
B) both luxury goods.
C) substitutes in consumption.
D) both inferior goods.
A) complements in consumption.
B) both luxury goods.
C) substitutes in consumption.
D) both inferior goods.
answer
A) complements in consumption.
question
Two goods are said to be substitutes when a fall in the price of one good-
A) leads to a left shift in the demand for the other good.
B) leads to a right shift in the demand for the other good.
C) doesn't affect the demand for the other good.
D) leads to a rise in the price of the other good.
A) leads to a left shift in the demand for the other good.
B) leads to a right shift in the demand for the other good.
C) doesn't affect the demand for the other good.
D) leads to a rise in the price of the other good.
answer
A) leads to a left shift in the demand for the other good.
question
In June, buyers of titanium expect that the price of titanium will fall in July. What happens in the titanium market in June, holding everything else constant?
A) The quantity demanded increases.
B) The quantity demanded decreases.
C) The demand curve shifts to the left.
D) The demand curve shifts to the right.
A) The quantity demanded increases.
B) The quantity demanded decreases.
C) The demand curve shifts to the left.
D) The demand curve shifts to the right.
answer
C) The demand curve shifts to the left.
question
If the price of muffins, a normal good you enjoy, rises-
A) both the income and substitution effects lead you to buy fewer muffins.
B) the income and substitution effects offset each other but the price effect leads you to buy fewer muffins.
C) the substitution effect which causes you to decrease your muffin consumption outweighs the income effect which causes you to increase your muffin consumption, resulting in fewer muffins purchased.
D) the income effect which causes you to decrease your muffin consumption outweighs the substitution effect which causes you to increase your muffin consumption, resulting in fewer muffins purchased.
A) both the income and substitution effects lead you to buy fewer muffins.
B) the income and substitution effects offset each other but the price effect leads you to buy fewer muffins.
C) the substitution effect which causes you to decrease your muffin consumption outweighs the income effect which causes you to increase your muffin consumption, resulting in fewer muffins purchased.
D) the income effect which causes you to decrease your muffin consumption outweighs the substitution effect which causes you to increase your muffin consumption, resulting in fewer muffins purchased.
answer
A) both the income and substitution effects lead you to buy fewer muffins.
question
A normal good is a good for which the demand increases as income decreases, holding everything else constant.
True or False?
True or False?
answer
False
question
If, when price changes by 35 percent, the quantity demanded changes by 7 percent, then the absolute value of the price elasticity of demand is 5.
True or False?
True or False?
answer
False
question
If the demand for cell phone service is inelastic, then-
A) the quantity demanded does not change in response to changes in price.
B) the percentage change in quantity demanded is equal to the percentage change in price.
C) the percentage change in quantity demanded is less than the percentage change in price (in absolute value).
D) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value)
A) the quantity demanded does not change in response to changes in price.
B) the percentage change in quantity demanded is equal to the percentage change in price.
C) the percentage change in quantity demanded is less than the percentage change in price (in absolute value).
D) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value)
answer
C) the percentage change in quantity demanded is less than the percentage change in price (in absolute value).
question
If demand is inelastic, the absolute value of the price elasticity of demand is-
A) less than one.
B) greater than one.
C) one.
D) greater than the absolute value of the slope of the demand curve.
A) less than one.
B) greater than one.
C) one.
D) greater than the absolute value of the slope of the demand curve.
answer
A) less than one.
question
To calculate the price elasticity of demand we divide-
A) the percentage change in price by the percentage change in quantity demanded.
B) the average price by the average quantity demanded.
C) rise by the run.
D) the percentage change in quantity demanded by the percentage change in price.
A) the percentage change in price by the percentage change in quantity demanded.
B) the average price by the average quantity demanded.
C) rise by the run.
D) the percentage change in quantity demanded by the percentage change in price.
answer
D) the percentage change in quantity demanded by the percentage change in price.
question
Facing stiff competition, Hendrix College, a small liberal arts institution in Conway, Ark., decided two years ago to bolster its academic offerings, promising students at least three hands-on experiences outside the classroom, including research, internships and service projects. Although it raised tuition and fees by 29 percent, enrollment in the freshman class rose by 37 percent.
A) perfectly elastic.
B) relatively inelastic.
C) unit elastic.
D) More information is needed to answer the question
A) perfectly elastic.
B) relatively inelastic.
C) unit elastic.
D) More information is needed to answer the question
answer
B) relatively inelastic.
question
Which of the following goods is likely to have the lowest price elasticity of demand?
A) Life-saving drugs
B) Chocolates
C) Potato chips
D) Decorative flowers
A) Life-saving drugs
B) Chocolates
C) Potato chips
D) Decorative flowers
answer
A) Life-saving drugs
question
Elasticity is:
A) the difference of the percentage change in two variables.
B) the product of the percentage change in two variables.
C) the ratio of the percentage change in two variables.
D) the sum of the percentage change in two variables.
A) the difference of the percentage change in two variables.
B) the product of the percentage change in two variables.
C) the ratio of the percentage change in two variables.
D) the sum of the percentage change in two variables.
answer
C) the ratio of the percentage change in two variables.
question
Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true?
A) It is perfectly elastic at very high prices and perfectly inelastic at very low prices.
B) It is inelastic at high prices and elastic at low prices.
C) It is unit elastic throughout the demand curve.
D) It is elastic at high prices and inelastic at low prices.
A) It is perfectly elastic at very high prices and perfectly inelastic at very low prices.
B) It is inelastic at high prices and elastic at low prices.
C) It is unit elastic throughout the demand curve.
D) It is elastic at high prices and inelastic at low prices.
answer
D) It is elastic at high prices and inelastic at low prices.
question
If a 1% change in the price of a good causes a 1% change in the quantity demanded, the good has an elasticity of demand:
A) greater than 1.
B) less than 1.
C) equal to 0.
D) equal to 1.
A) greater than 1.
B) less than 1.
C) equal to 0.
D) equal to 1.
answer
D) equal to 1.
question
If a good has a price elasticity of demand of -3, it implies that:
A) if the income of the consumer increases by 1%, the quantity demanded of that good will increase by 3%.
B) if the price of the good increases by 3%, the quantity demanded of the good will increase by 1%.
C) if the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%.
D) if the income of the consumer increases by 3%, the quantity demanded of that good will increase by 1%.
A) if the income of the consumer increases by 1%, the quantity demanded of that good will increase by 3%.
B) if the price of the good increases by 3%, the quantity demanded of the good will increase by 1%.
C) if the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%.
D) if the income of the consumer increases by 3%, the quantity demanded of that good will increase by 1%.
answer
C) if the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%.
question
If demand is inelastic, the absolute value of the price elasticity of demand is-
A) less than one.
B) one.
C) greater than one.
D) greater than the absolute value of the slope of the demand curve.
A) less than one.
B) one.
C) greater than one.
D) greater than the absolute value of the slope of the demand curve.
answer
A) less than one.
question
A good is said to have a relatively elastic demand if the value of price elasticity is:
A) between 0.5 and 1.
B) between 0 and 0.5.
C) greater than 1.
D) equal to 0.
A) between 0.5 and 1.
B) between 0 and 0.5.
C) greater than 1.
D) equal to 0.
answer
C) greater than 1.
question
Price elasticity of demand measures-
A) how responsive quantity demanded is to a change in price.
B) how responsive suppliers are to price changes.
C) how responsive sales are to a change in buyers' incomes.
D) how responsive sales are to changes in the price of a related good.
A) how responsive quantity demanded is to a change in price.
B) how responsive suppliers are to price changes.
C) how responsive sales are to a change in buyers' incomes.
D) how responsive sales are to changes in the price of a related good.
answer
A) how responsive quantity demanded is to a change in price.
question
Economists use the concept of ________ to measure how one economic variable, such as quantity, responds to a change in another economic variable, such as price.
A) relativity
B) slope
C) elasticity
D) efficiency
A) relativity
B) slope
C) elasticity
D) efficiency
answer
C) elasticity
question
Elasticity is:
A) the difference of the percentage change in two variables.
B) the product of the percentage change in two variables.
C) the ratio of the percentage change in two variables.
D) the sum of the percentage change in two variables.
A) the difference of the percentage change in two variables.
B) the product of the percentage change in two variables.
C) the ratio of the percentage change in two variables.
D) the sum of the percentage change in two variables.
answer
C) the ratio of the percentage change in two variables.
question
Which of the following goods is likely to have the highest price elasticity of demand?
A) Ketchup
B) Salt
C) Gasoline
D) Life-saving drugs
A) Ketchup
B) Salt
C) Gasoline
D) Life-saving drugs
answer
A) Ketchup
question
If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.
True or False?
True or False?
answer
False
question
If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is-
A) elastic.
B) perfectly elastic.
C) inelastic.
D) unit elastic.
A) elastic.
B) perfectly elastic.
C) inelastic.
D) unit elastic.
answer
A) elastic.
question
________ is the measure of the sensitivity of one variable to a change in another.
A) Amplitude
B) Buoyancy
C) Multiplier
D) Elasticity
A) Amplitude
B) Buoyancy
C) Multiplier
D) Elasticity
answer
D) Elasticity
question
When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent. This indicates that the demand for tortilla chips is-
A) perfectly inelastic.
B) inelastic.
C) unit elastic.
D) elastic.
A) perfectly inelastic.
B) inelastic.
C) unit elastic.
D) elastic.
answer
B) inelastic.
question
If demand is perfectly inelastic, the absolute value of the price elasticity of demand is-
A) zero.
B) more than one.
C) less than one.
D) equal to the absolute value of the slope of the demand curve
A) zero.
B) more than one.
C) less than one.
D) equal to the absolute value of the slope of the demand curve
answer
A) zero.
question
Which of the following best describes a good with perfectly elastic demand?
A) Even the smallest increase in the price of the good will cause consumers to stop consuming it completely.
B) The quantity demanded of the good is completely unaffected by a price change.
C) The demand curve for the good initially slopes upward, reaches its maximum, and then slopes downward.
D) For a given price change, the percentage change in quantity demanded will be less than the percentage change in its price.
A) Even the smallest increase in the price of the good will cause consumers to stop consuming it completely.
B) The quantity demanded of the good is completely unaffected by a price change.
C) The demand curve for the good initially slopes upward, reaches its maximum, and then slopes downward.
D) For a given price change, the percentage change in quantity demanded will be less than the percentage change in its price.
answer
A) Even the smallest increase in the price of the good will cause consumers to stop consuming it completely.
question
The cross-price elasticity of demand for a good is the:
A) percentage change in the quantity demanded for a good due to a percentage change in the good's price.
B) percentage change in the quantity demanded for a good due to a percentage change in tax rates.
C) percentage change in the quantity demanded for a good due to a percentage change in the price of related goods.
D) percentage change in the quantity demanded for a good due to a percentage change in the consumer's income.
A) percentage change in the quantity demanded for a good due to a percentage change in the good's price.
B) percentage change in the quantity demanded for a good due to a percentage change in tax rates.
C) percentage change in the quantity demanded for a good due to a percentage change in the price of related goods.
D) percentage change in the quantity demanded for a good due to a percentage change in the consumer's income.
answer
C) percentage change in the quantity demanded for a good due to a percentage change in the price of related goods.
question
Which of the following would result in a higher absolute value of the price elasticity of demand for a product?
A) The good is a necessity.
B) The time period under consideration is short.
C) The expenditure on the good is small relative to one's budget.
D) A wide variety of substitutes are available for the good
A) The good is a necessity.
B) The time period under consideration is short.
C) The expenditure on the good is small relative to one's budget.
D) A wide variety of substitutes are available for the good
answer
D) A wide variety of substitutes are available for the good
question
If the income elasticity for canned food is 0.8, then canned food is an inferior good.
True or False?
True or False?
answer
False
question
Consider the following pairs of items:
a. shampoo and conditioner
b. iPhones and earbuds
c. a laptop computer and a desktop computer
d. beef and pork
e. air-travel and weed killer
A) a and b only
B) c and d only
C) e only
D) a, b, and c only
a. shampoo and conditioner
b. iPhones and earbuds
c. a laptop computer and a desktop computer
d. beef and pork
e. air-travel and weed killer
A) a and b only
B) c and d only
C) e only
D) a, b, and c only
answer
A) a and b only
question
Which of the following items is likely to have the highest income elasticity of demand?
A) a hamburger
B) water
C) breakfast cereal
D) a luxury cruise to several European countries
A) a hamburger
B) water
C) breakfast cereal
D) a luxury cruise to several European countries
answer
D) a luxury cruise to several European countries
question
The price elasticity of demand for Kellogg's Raisin Bran is larger in absolute value than the price elasticity for all breakfast cereals.
True or False?
True or False?
answer
True
question
If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is-
A) horizontal.
B) curvilinear.
C) vertical.
D) downward sloping.
A) horizontal.
B) curvilinear.
C) vertical.
D) downward sloping.
answer
C) vertical.
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