question
The branch of economics that focuses on decision making for the economy as a whole is called:
a. normative economics
b. positive economics
c. microeconomics
d. macroeconomics
a. normative economics
b. positive economics
c. microeconomics
d. macroeconomics
answer
d. macroeconomics
question
Human wants:
a. are unfilled only in the poorer countries in the world
b. can be completely satisfied by advancing technology
c. are unlimited
d. only apply to necessities
e. exist only if we are selfish
a. are unfilled only in the poorer countries in the world
b. can be completely satisfied by advancing technology
c. are unlimited
d. only apply to necessities
e. exist only if we are selfish
answer
c. are unlimited
question
Scarcity:
a. is a problem only in the poorer countries of the world
b. can be solved by rapid advances in technology
c. is a problem that exists in ever economy
d. is not a problem for the very rich
a. is a problem only in the poorer countries of the world
b. can be solved by rapid advances in technology
c. is a problem that exists in ever economy
d. is not a problem for the very rich
answer
c. is a problem that exists in ever economy
question
A tractor is an example of which of the following factors of production?
a. land
b. labor
c. capital
d. entrepreneurship
a. land
b. labor
c. capital
d. entrepreneurship
answer
c. capital
question
Which of the following is a resource or factor of production?
a. land
b. labor
c. entrepreneurship
d. capital
e. all of the above
a. land
b. labor
c. entrepreneurship
d. capital
e. all of the above
answer
e. all of the above
question
Which of the following is the best example of a nonrenewable resource?
a. forests
b. crude oil or natural gas
c. clean air
d. fish in the ocean
a. forests
b. crude oil or natural gas
c. clean air
d. fish in the ocean
answer
b. crude oil or natural gas
question
Which of the following is the best example of a microeconomic topic?
a. the impact that the money supply has on inflation
b. the analysis of Ford Motors' competitiveness in the automobile industry
c. the effect that federal budget deficits have on the interest rate
d. the tradeoff between inflation and unemployment
a. the impact that the money supply has on inflation
b. the analysis of Ford Motors' competitiveness in the automobile industry
c. the effect that federal budget deficits have on the interest rate
d. the tradeoff between inflation and unemployment
answer
b. the analysis of Ford Motors' competitiveness in the automobile industry
question
An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, Ceteris paribus. The phrase "Ceteris paribus" means that:
a. other relevant factors like consumer incomes, population etc. must be held constant
b. the gasoline prices must first be adjusted for inflation
c. the theory is widely accepted but cannot be accurately tested
d. consumers' need for gasoline remains the same regardless of the price
a. other relevant factors like consumer incomes, population etc. must be held constant
b. the gasoline prices must first be adjusted for inflation
c. the theory is widely accepted but cannot be accurately tested
d. consumers' need for gasoline remains the same regardless of the price
answer
a. other relevant factors like consumer incomes, population etc. must be held constant
question
When economists use the term Ceteris paribus, they are indicating that:
a. the relationship between two economic variables cannot be determined
b. the analysis is true for the individual but not for the economy as a whole
c. all other variables except the ones specified are assumed to be constant.
d. their conclusions are based on normative rather than positive economic analysis
a. the relationship between two economic variables cannot be determined
b. the analysis is true for the individual but not for the economy as a whole
c. all other variables except the ones specified are assumed to be constant.
d. their conclusions are based on normative rather than positive economic analysis
answer
c. all other variables except the ones specified are assumed to be constant.
question
Which of the following represents a positive economics statement?
a. a very higher income tax rate will reduce the amount of time that people spend working. It will also lead to a higher level of underground economy
b. teenage unemployment should be reduced
c. we should raise the standard of living for the elderly
d. a decrease in tax rates is needed to help the poor
a. a very higher income tax rate will reduce the amount of time that people spend working. It will also lead to a higher level of underground economy
b. teenage unemployment should be reduced
c. we should raise the standard of living for the elderly
d. a decrease in tax rates is needed to help the poor
answer
a. a very higher income tax rate will reduce the amount of time that people spend working. It will also lead to a higher level of underground economy
question
The statement. "Violent crime (statistics show) has decreased in the last five years," is:
a. both a positive & normative eco statement
b. normative eco statement
c. positive because it is testable
d. none of the above
a. both a positive & normative eco statement
b. normative eco statement
c. positive because it is testable
d. none of the above
answer
c. positive because it is testable
question
Statistics show that an increase in the federal minimum wage causes an increase in unemployment among teenagers:
a. is a positive economics statement
b. is a normative economics statement
c. is a microeconomic statement because it deals with unemployment
d. none of the above
a. is a positive economics statement
b. is a normative economics statement
c. is a microeconomic statement because it deals with unemployment
d. none of the above
answer
a. is a positive economics statement
question
The fundamental question(s) ever society asks/answers are:
a. how to produce?
b. what to produce?
c. for whom to produce?
d. all of the above
a. how to produce?
b. what to produce?
c. for whom to produce?
d. all of the above
answer
d. all of the above
question
Which fundamental economic question requires society to choose the combination (mix) of resources (factors of productions) in order to produce goods & services?
a. the What to Produce question
b. the Why to Produce question
c. the How to Produce question
d. the For Whom to Produce question
a. the What to Produce question
b. the Why to Produce question
c. the How to Produce question
d. the For Whom to Produce question
answer
c. the How to Produce question
question
The opportunity cost of making a decision (by an individual or a society) is:
a. the best alternative that was sacrificed
b. the amount of money needed to implement the decision
c. any land, labor, and capital that are wasted
d. always zero
a. the best alternative that was sacrificed
b. the amount of money needed to implement the decision
c. any land, labor, and capital that are wasted
d. always zero
answer
a. the best alternative that was sacrificed
question
The opportunity cost of an action taken by an individual/society is:
a. the monetary payment the action required
b. the total time spent by all parties in carrying out the action
c. the value of the best opportunity that must be sacrificed in order to take the current action
d. the cost of all alternative actions that could have been taken, added together
a. the monetary payment the action required
b. the total time spent by all parties in carrying out the action
c. the value of the best opportunity that must be sacrificed in order to take the current action
d. the cost of all alternative actions that could have been taken, added together
answer
c. the value of the best opportunity that must be sacrificed in order to take the current action
question
If an economy is operating at a point inside the production possibilities curve,
a. its resources are not being used efficiently
b. the curve will begin to shift inward
c. the curve will begin to shift outward
d. an economy cannot produce at a point inside the curve
a. its resources are not being used efficiently
b. the curve will begin to shift inward
c. the curve will begin to shift outward
d. an economy cannot produce at a point inside the curve
answer
a. its resources are not being used efficiently
question
A point outside the production possibilities curve represents a combination of goods that is:
a. inefficient
b. efficient
c. unattainable
d. attainable
a. inefficient
b. efficient
c. unattainable
d. attainable
answer
c. unattainable
question
Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?
a. an increase in the labor force
b. an increase in employment
c. development of an improved technological method of production
d. a decrease in the stock of physical capital
a. an increase in the labor force
b. an increase in employment
c. development of an improved technological method of production
d. a decrease in the stock of physical capital
answer
d. a decrease in the stock of physical capital
question
Any point on the production possibilities curve illustrates:
a. minimum production combinations
b. maximum production combinations
c. no production combination
d. none of the above
a. minimum production combinations
b. maximum production combinations
c. no production combination
d. none of the above
answer
b. maximum production combinations
question
A production possibilities curve (PPC) or production possibilities frontier (PPF) shows the various:
a. prices that can be charged for capital/producer and consumption goods
b. combinations of prices and outputs that can be produced
c. combinations of goods the economy has the capacity to produce
d. combinations of resources and prices that the economy can produce
a. prices that can be charged for capital/producer and consumption goods
b. combinations of prices and outputs that can be produced
c. combinations of goods the economy has the capacity to produce
d. combinations of resources and prices that the economy can produce
answer
c. combinations of goods the economy has the capacity to produce
question
If an economy keeps increasing its capital stock/number of workers/technology/natural resources, then over time its production possibilities curve will:
a. not move
b. shift to the left
c. shift to the right
d. disappear because scarcity ceases to exist
e. demonstrate massive job loss for workers
a. not move
b. shift to the left
c. shift to the right
d. disappear because scarcity ceases to exist
e. demonstrate massive job loss for workers
answer
c. shift to the right
question
Compare two economies A and B that start out with identical production possibilities curves. Economy A chooses an efficient point with 10 consumption/consumer goods (more consumer goods as compared to economy B) and 5 capital/producer/industrial goods, while economy B also chooses an efficient point, but with 6 consumption/consumer goods and 9 capital/producer/industrial goods. In the future we can predict:
a. economy A will operate outside its PPC/PPF
b. economy B will operate inefficiently
c. economy A and economy B will grow equally fast
d. economy A will grow faster than economy B
e. economy B will grow faster than economy A
a. economy A will operate outside its PPC/PPF
b. economy B will operate inefficiently
c. economy A and economy B will grow equally fast
d. economy A will grow faster than economy B
e. economy B will grow faster than economy A
answer
e. economy B will grow faster than economy A
question
Economic growth may be represented by a(n):
a. leftward shift of a production possibilities curve
b. outward shift of a production possibilities curve
c. movement along a production possibilities curve
d. production possibilities curve that remains fixed
a. leftward shift of a production possibilities curve
b. outward shift of a production possibilities curve
c. movement along a production possibilities curve
d. production possibilities curve that remains fixed
answer
b. outward shift of a production possibilities curve
question
From an economic standpoint, government intervention is justified:
a. when the market mechanism fails to achieve the optimal mix of output
b. because the government will produce more goods/services
c. because the government always increases the market power of the private sector
d. When the private sector is larger than public sector
a. when the market mechanism fails to achieve the optimal mix of output
b. because the government will produce more goods/services
c. because the government always increases the market power of the private sector
d. When the private sector is larger than public sector
answer
a. when the market mechanism fails to achieve the optimal mix of output
question
Using the above figure, suppose C represents the optimal mix of output for a society. If market forces cause society to produce at point D, then, the society may allow the government to intervene in the economy; and such a government intervention;
a. could move the production to the optimal level C
b. could move the production to point B in the diagram
c. could move the production to point A in the diagram
d. all of the above
a. could move the production to the optimal level C
b. could move the production to point B in the diagram
c. could move the production to point A in the diagram
d. all of the above
answer
d. all of the above
question
All power owned by a few individuals in society
answer
feudalism
question
Individuals produced things individuals making profit
answer
Mercantilism
question
An economic system characterized by private ownership of resources and markets; supply and demand; government does not interfere; what we have
answer
capitalism
question
state control of resources and services
answer
communism
question
maximize utility/satisfaction subject to budget constraint or minimize cost
answer
consumers' objective
question
Maximize profit
answer
producers' objective
question
maximize net social welfare
answer
society's objective
question
land, labor, capital, entrepreneurship
answer
scarce resources
question
the study of decision making undertaken by individuals, households, business firms/corporations/companies
answer
microeconomics
question
the study of the behavior of the economy as a whole
answer
macroeconomics
question
latin phrase---while certain variables change, all others being constant, other forces/determinants remain unchanged. Consumers/producers/ government buy less of a good/service/resource when its price increases
answer
ceteris paribus
question
According to the law of demand, the quantity of a good demanded in a given time period:
a. Increases as its price rises, ceteris paribus
b. increases as its price falls, ceteris paribus
c. decreases as its price falls, ceteris paribus
d. does not change when price changes
a. Increases as its price rises, ceteris paribus
b. increases as its price falls, ceteris paribus
c. decreases as its price falls, ceteris paribus
d. does not change when price changes
answer
b. increases as its price falls, ceteris paribus
question
Ceteris paribus, if the price of a digital camera rises, then we can expect:
a. an increase in the demand for digital cameras (outward shift or shift to the right)
b. an increase in the quantity demanded of digital cameras (a movement along the same curve)
c. A decrease in the demand for digital cameras (an inward shift or a lefward shift in the demand curve)
d. a decrease in the quantity demanded of digital cameras (movement along the same curve)
a. an increase in the demand for digital cameras (outward shift or shift to the right)
b. an increase in the quantity demanded of digital cameras (a movement along the same curve)
c. A decrease in the demand for digital cameras (an inward shift or a lefward shift in the demand curve)
d. a decrease in the quantity demanded of digital cameras (movement along the same curve)
answer
d. a decrease in the quantity demanded of digital cameras (movement along the same curve)
question
Ceteris paribus, if the price of swiss cheese falls, then we will see:
a. an increase in the demand for swiss cheese
b. a decrease in the demand for swiss cheese
c. an increase in the quantity demanded of swiss cheese
d. a decrease in the quantity demanded of swiss cheese
a. an increase in the demand for swiss cheese
b. a decrease in the demand for swiss cheese
c. an increase in the quantity demanded of swiss cheese
d. a decrease in the quantity demanded of swiss cheese
answer
c. an increase in the quantity demanded of swiss cheese
question
Ceteris paribus, which of the following is most likely to cause an increase in the quantity demanded of candles?
a. a decrease in the price of candles
b. an increase in income
c. a decrease in taste for candles
d. an increase in the price of electricity
a. a decrease in the price of candles
b. an increase in income
c. a decrease in taste for candles
d. an increase in the price of electricity
answer
a. a decrease in the price of candles
question
Ceteris paribus, if the price of basketballs rises, then we will see:
a. the demand curve for basketballs shift to the right
b. the supply curve for the basketballs shift to the right
c. a movement to the right along the demand curve for basketballs
d. a movement to the left along the demand curve for basketballs
a. the demand curve for basketballs shift to the right
b. the supply curve for the basketballs shift to the right
c. a movement to the right along the demand curve for basketballs
d. a movement to the left along the demand curve for basketballs
answer
d. a movement to the left along the demand curve for basketballs
question
Which of the following would generally cause an increase in the demand for automobiles (outward shift in the demand curve or a shift to the right in the demand curve)?
a. a decrease in the price of automobiles
b. an increase in consumers' income
c. the new models are perceived as ugly compared with old models
d. consumer expectations that the price of automobiles will be lower next year
a. a decrease in the price of automobiles
b. an increase in consumers' income
c. the new models are perceived as ugly compared with old models
d. consumer expectations that the price of automobiles will be lower next year
answer
b. an increase in consumers' income
question
If buyers expect the price of baseballs to fall in the future, then right now (currently) there should be:
A) An increase in the demand (outward shift of the demand curve) for baseballs.
B) A decrease in the supply of baseballs (leftward shift of the supply curve).
C) A decrease in the demand for baseballs.
D) No change in the supply of or demand for baseballs since the price is not changing right now.
A) An increase in the demand (outward shift of the demand curve) for baseballs.
B) A decrease in the supply of baseballs (leftward shift of the supply curve).
C) A decrease in the demand for baseballs.
D) No change in the supply of or demand for baseballs since the price is not changing right now.
answer
C) A decrease in the demand for baseballs.
question
Assume Pepsi and Coke are substitutes. An increase in the price of one will result in:
A) A decrease in demand for the other.
B) A decrease in the quantity demanded of the other.
C) An increase in the demand for the other.
D) An increase in the quantity demanded of the other.
A) A decrease in demand for the other.
B) A decrease in the quantity demanded of the other.
C) An increase in the demand for the other.
D) An increase in the quantity demanded of the other.
answer
C) An increase in the demand for the other.
question
If there are only two airlines that fly between Dallas and New Orleans, what will happen in the market for one airline if the other one goes out of business?
A) The demand curve will shift to the right.
B) The demand curve will shift to the left.
C) There will be a movement to the right along the initial demand curve.
D) There will be a movement to the left along the initial demand curve.
A) The demand curve will shift to the right.
B) The demand curve will shift to the left.
C) There will be a movement to the right along the initial demand curve.
D) There will be a movement to the left along the initial demand curve.
answer
A) The demand curve will shift to the right.
question
10. Peanut butter and jelly are complements. A decrease in the price of one will result in:
A) A decrease in the demand for the other.
B) A decrease in the quantity demanded of the other.
C) An increase in the demand for the other.
D) An increase in the quantity demanded of the other.
A) A decrease in the demand for the other.
B) A decrease in the quantity demanded of the other.
C) An increase in the demand for the other.
D) An increase in the quantity demanded of the other.
answer
C) An increase in the demand for the other.
question
Given a downward-sloping market demand curve for web design services, if the price of web design services is decreased from $12 per hour to $9 per hour, then:
A) Demand for web design services will increase.
B) The quantity demanded of web design services will increase.
C) Demand for web design services will decrease.
D) The quantity demanded of web design services will decrease.
A) Demand for web design services will increase.
B) The quantity demanded of web design services will increase.
C) Demand for web design services will decrease.
D) The quantity demanded of web design services will decrease.
answer
B) The quantity demanded of web design services will increase.
question
An increase in the price of a good causes a:
A) Rightward shift in the supply curve. C) Movement down the supply curve.
B) Movement up along the same supply curve. D) Leftward shift in the supply curve.
A) Rightward shift in the supply curve. C) Movement down the supply curve.
B) Movement up along the same supply curve. D) Leftward shift in the supply curve.
answer
B) Movement up along the same supply
question
Which of the following is most likely to cause an increase in the quantity supplied of candles (movement along the same curve)?
A) An improvement in candle-making technology.
B) An increase in the cost of candle wicks.
C) An increase in the price of candles.
D) An increase in the number of sellers of candles.
A) An improvement in candle-making technology.
B) An increase in the cost of candle wicks.
C) An increase in the price of candles.
D) An increase in the number of sellers of candles.
answer
C) An increase in the price of candles.
question
Which of the following events would cause a rightward shift in the market supply curve for automobiles?
A) A technological improvement which reduces the cost of production.
B) An increase in the wages of autoworkers.
C) A higher sales tax on automobiles.
D) A decrease in the number of sellers.
A) A technological improvement which reduces the cost of production.
B) An increase in the wages of autoworkers.
C) A higher sales tax on automobiles.
D) A decrease in the number of sellers.
answer
A) A technological improvement which reduces the cost of production.
question
If corn and wheat are alternative pursuits for a farmer, a change in the supply of corn will take place when:
A) The price of corn changes.
B) The price of wheat changes.
C) Consumers want to buy more corn at the same price
D) None of the above
A) The price of corn changes.
B) The price of wheat changes.
C) Consumers want to buy more corn at the same price
D) None of the above
answer
B) The price of wheat changes.
question
Which of the following can change without shifting either demand or supply curves,
A) The price of the good itself. C) The prices of other goods.
B) Incomes. D) All of the above.
A) The price of the good itself. C) The prices of other goods.
B) Incomes. D) All of the above.
answer
A) The price of the good itself.
question
If there is a surplus at a given price, then:
A) The market is in equilibrium at that price.
B) That price is greater than the equilibrium price.
C) That price is lower than the equilibrium price.
D) All of the above are possible.
A) The market is in equilibrium at that price.
B) That price is greater than the equilibrium price.
C) That price is lower than the equilibrium price.
D) All of the above are possible.
answer
B) That price is greater than the equilibrium price.
question
In most markets, the equilibrium price is achieved:
A) Through detailed databases. C) Using an equilibrium price formula.
B) Through government mandate. D) Through trial and error.
A) Through detailed databases. C) Using an equilibrium price formula.
B) Through government mandate. D) Through trial and error.
answer
D) Through trial and error.
question
If the quantity demanded of a good is greater than the quantity supplied of the good at the current price, then, in the long run (remember! without govt. intervention/interference in this market),
A) Price will increase until it reaches the equilibrium price.
B) The demand curve will shift to the left to create an equilibrium.
C) The supply curve will shift to the right to create an equilibrium.
D) There is a surplus of the good.
A) Price will increase until it reaches the equilibrium price.
B) The demand curve will shift to the left to create an equilibrium.
C) The supply curve will shift to the right to create an equilibrium.
D) There is a surplus of the good.
answer
A) Price will increase until it reaches the equilibrium price.
question
A decrease in quantity demanded (not shifting the demand curve) is given as a (n):
A) Increase in the price of a substitute good.
B) Decrease in the price of a substitute good.
C) Upward movement along the demand curve.
D) Downward movement along the demand curve.
A) Increase in the price of a substitute good.
B) Decrease in the price of a substitute good.
C) Upward movement along the demand curve.
D) Downward movement along the demand curve.
answer
C) Upward movement along the demand curve.
question
On a supply-and-demand diagram, quantity demanded equals quantity supplied:
A) Only at the single (one) equilibrium point.
B) At every price at or above the equilibrium price.
C) At every price.
D) All of the above.
A) Only at the single (one) equilibrium point.
B) At every price at or above the equilibrium price.
C) At every price.
D) All of the above.
answer
A) Only at the single (one) equilibrium point.
question
There are two universities, A and B, in Michigan. Tuition rises at University A and, as a result, the demand for attending University B rises. It follows that educational services at the two universities are:
A) Complements.
B) Unrelated.
C) Substitutes.
D) None of the above.
A) Complements.
B) Unrelated.
C) Substitutes.
D) None of the above.
answer
C) Substitutes.
question
Assume that a computer is a normal good. An increase in consumer income would:
A) Shift the supply curve for computers to the left.
B) Shift the supply curve for computers to the right.
C) Shift the demand curve for computers to the left.
D) Shift the demand curve for computers to the right.
A) Shift the supply curve for computers to the left.
B) Shift the supply curve for computers to the right.
C) Shift the demand curve for computers to the left.
D) Shift the demand curve for computers to the right.
answer
D) Shift the demand curve for computers to the right.
question
Imposing a tax on an industry by the government would result in:
A) A downward movement on the same supply curve.
B) A rightward shift of the supply curve.
C) A leftward shift of the supply curve.
D) None of the above.
A) A downward movement on the same supply curve.
B) A rightward shift of the supply curve.
C) A leftward shift of the supply curve.
D) None of the above.
answer
C) A leftward shift of the supply curve.
question
The equilibrium price and quantity in the above diagram for a good/service, under perfect competition, occur at a price of:
A) $150 and a quantity of 200 units. C) $200 and a quantity of 300 units.
B) $150 and a quantity of 300 units. D) $200 and a quantity of 200 units.
A) $150 and a quantity of 200 units. C) $200 and a quantity of 300 units.
B) $150 and a quantity of 300 units. D) $200 and a quantity of 200 units.
answer
B) $150 and a quantity of 300 units.
question
If a price ceiling of $100 was in effect in the above figure (chapter 4!):
A) A shortage of 200 units would occur. C) A shortage of 100 units would occur.
B) A surplus of 200 units would occur. D) A surplus of 100 units would occur.
A) A shortage of 200 units would occur. C) A shortage of 100 units would occur.
B) A surplus of 200 units would occur. D) A surplus of 100 units would occur.
answer
A) A shortage of 200 units would occur.
question
In the above graph for a commodity, say, corn, under a perfectly competitive market structure, at a price of $250:
A) The market is in equilibrium.
B) The quantity demanded is greater than the quantity supplied.
C) The quantity supplied is greater than the quantity demanded.
D) A shortage exists.
A) The market is in equilibrium.
B) The quantity demanded is greater than the quantity supplied.
C) The quantity supplied is greater than the quantity demanded.
D) A shortage exists.
answer
C) The quantity supplied is greater than the quantity demanded.
question
Using the above diagram, at a price of $50:
A) The quantity demanded is 100 units. C) The quantity supplied is 500 units.
B) The quantity demanded is 300 units. D) The quantity supplied is 100 units.
A) The quantity demanded is 100 units. C) The quantity supplied is 500 units.
B) The quantity demanded is 300 units. D) The quantity supplied is 100 units.
answer
D) The quantity supplied is 100 units.
question
Assuming Coca-Cola & Pepsi-Cola are substitute goods, the effect of an increase in the price of Coca-Cola would cause which of the following:
A) A rightward shift in the demand curve for Coca-Cola.
B) A downward movement along the demand curve for Pepsi-Cola.
C) A leftward shift in the demand curve for Pepsi -Cola.
D) An upward movement along the demand curve for automobiles.
E) A rightward shift in the demand curve for Pepsi-Cola.
A) A rightward shift in the demand curve for Coca-Cola.
B) A downward movement along the demand curve for Pepsi-Cola.
C) A leftward shift in the demand curve for Pepsi -Cola.
D) An upward movement along the demand curve for automobiles.
E) A rightward shift in the demand curve for Pepsi-Cola.
answer
E) A rightward shift in the demand curve for Pepsi-Cola.
question
Decreasing the level of a subsidy (a supply curve shifter!) to an industry by the government would result in:
A) A downward movement on the same supply curve.
B) A rightward shift of the supply curve.
C) A leftward shift of the supply curve.
D) None of the above.
A) A downward movement on the same supply curve.
B) A rightward shift of the supply curve.
C) A leftward shift of the supply curve.
D) None of the above.
answer
C) A leftward shift of the supply curve.
question
The law of supply states that when the price of a commodity rises, the quantity supplied of that commodity rises too and vice versa, ceteris paribus, which means that:
A) The model includes all important variables occurring in the real world.
B) All factors which influence the event are changing at the same time.
C) Two variables are changing and everything else is being held constant.
D) All of the above.
A) The model includes all important variables occurring in the real world.
B) All factors which influence the event are changing at the same time.
C) Two variables are changing and everything else is being held constant.
D) All of the above.
answer
C) Two variables are changing and everything else is being held constant.
question
Decreasing a tax on an industry by the government would result in:
E) A downward movement on the same supply curve.
F) A rightward shift of the supply curve.
G) A leftward shift of the supply curve.
H) None of the above.
E) A downward movement on the same supply curve.
F) A rightward shift of the supply curve.
G) A leftward shift of the supply curve.
H) None of the above.
answer
F) A rightward shift of the supply curve.
question
When the number of buyers in a market changes, the market-demand curve for goods and services shifts.
answer
T
question
A decrease in the price of personal computers would shift the demand curve for personal computers to the right (increase in demand).
answer
F
question
There are never shortages or surpluses when the price in a market is equal to the equilibrium price for the market.
answer
T
question
As one moves down the demand curve for carrots, the quantity demanded for carrots increases and the price of carrots decreases.
answer
T
question
Assuming the demand curve for orange juice shifts to the right (increase in demand). Also, assuming the supply curve for orange juice shifts to the right (increase in supply). Assume further that the shifts in both curves are not determined (which means the shift in the demand curve could be wider than the shift in the supply curve, vice versa, or both shifts could be the same). Which of the following would be a certain outcome in the market for orange juice?
A) Both the price and quantity increase.
B) The price increases but the change in the quantity cannot be determined (which means the quantity could increase, decrease, or remain the same).
C) The quantity increases but the change in the price cannot be determined (which means the price could increase, decrease, or remain the same).
D) Both the price and quantity decrease.
E) None of the above.
A) Both the price and quantity increase.
B) The price increases but the change in the quantity cannot be determined (which means the quantity could increase, decrease, or remain the same).
C) The quantity increases but the change in the price cannot be determined (which means the price could increase, decrease, or remain the same).
D) Both the price and quantity decrease.
E) None of the above.
answer
C) The quantity increases but the change in the price cannot be determined (which means the price could increase, decrease, or remain the same).
question
Assuming the demand curve for the U.S. automobiles shifts to the left (decease in demand). Also, assuming the supply curve for automobiles shifts to the left (decrease in supply). Assume further that the shifts in both curves are not determined (which means the shift in the demand curve could be wider than the shift in the supply curve, vice versa, or both shifts could be the same). Which of the following would be a certain outcome in the market for automobiles in the U.S.?
A) Both the price and quantity increase.
B) The price decreases but the change in the quantity cannot be determined (which means the quantity could increase, decrease, or remain unchanged).
C) The quantity decreases but the change in the price cannot be determined (which means the price may increase, decrease, or remain the same).
D) Both the price and quantity decrease.
E) None of the above.
A) Both the price and quantity increase.
B) The price decreases but the change in the quantity cannot be determined (which means the quantity could increase, decrease, or remain unchanged).
C) The quantity decreases but the change in the price cannot be determined (which means the price may increase, decrease, or remain the same).
D) Both the price and quantity decrease.
E) None of the above.
answer
C) The quantity decreases but the change in the price cannot be determined (which means the price may increase, decrease, or remain the same).
question
Assuming the global demand curve for gas shifts to the left (decease in demand). Also, assuming the global supply curve for gas shifts to the right (increase in supply). Assume further that the shifts in both curves are not determined (which means the shift in the demand curve could be wider than the shift in the supply curve, vice versa, or both shifts could be the same). Which of the following would be a certain outcome in the world market for gas?
A) Both the price and quantity increase.
B) The price increases but the change in the quantity cannot be determined (which means the quantity could increase, decrease, or remain the same).
C) The quantity increases but the change in the price cannot be determined (which means the price could increase, decrease, or remain the same).
D) The price decreases but the change in the quantity cannot be determined (which means the quantity could increase, decrease, or remain the same).
E) None of the above.
A) Both the price and quantity increase.
B) The price increases but the change in the quantity cannot be determined (which means the quantity could increase, decrease, or remain the same).
C) The quantity increases but the change in the price cannot be determined (which means the price could increase, decrease, or remain the same).
D) The price decreases but the change in the quantity cannot be determined (which means the quantity could increase, decrease, or remain the same).
E) None of the above.
answer
D) The price decreases but the change in the quantity cannot be determined (which means the quantity could increase, decrease, or remain the same).
question
Assuming there is an increase in the demand for housing (the demand curve shifts to the right or outward shift). Also, assuming there is a decrease in the supply of housing (the supply curve shifts to the left or inward shift). Assume further that the shifts in both curves are not determined (which means the shift in the demand curve could be wider than the shift in the supply curve, vice versa, or both shifts could be the same). Which of the following would be a certain outcome in the housing market?
A) Lower equilibrium price. C) Lower equilibrium quantity.
B) Higher equilibrium price. D) Higher equilibrium quantity.
A) Lower equilibrium price. C) Lower equilibrium quantity.
B) Higher equilibrium price. D) Higher equilibrium quantity.
answer
B) Higher equilibrium price.
question
Which of the following would be a certain outcome of a rightward shift in the demand curve and a leftward shift in the supply of a commodity. Assume further that the shifts in both curves are not determined (which means the shift in the demand curve could be wider than the shift in the supply curve, vice versa, or both shifts could be the same). Which of the following would be a certain outcome in the market of this commodity?
A) Lower equilibrium price. C) Lower equilibrium quantity.
B) Higher equilibrium price. D) Higher equilibrium quantity.
A) Lower equilibrium price. C) Lower equilibrium quantity.
B) Higher equilibrium price. D) Higher equilibrium quantity.
answer
B) Higher equilibrium price.
question
Suppose both the demand and supply of crude oil, in the world oil market/industry increase (although not necessarily by the same amount...a three-diagram scenario!!). What can we conclude about changes in the price and quantity of this commodity?
A) Both the price and quantity increase.
B) The price increases but the change in the quantity cannot be determined.
C) The quantity increases but the change in the price cannot be determined.
D) Both the price and quantity decrease.
A) Both the price and quantity increase.
B) The price increases but the change in the quantity cannot be determined.
C) The quantity increases but the change in the price cannot be determined.
D) Both the price and quantity decrease.
answer
C) The quantity increases but the change in the price cannot be determined.
question
Suppose both the demand and supply of peaches in a local/national/global market decrease (although not necessarily by the same amount). What can we conclude about changes in the price and quantity of peaches?
A) Both the price and quantity increase.
B) The price decreases but the change in the quantity cannot be determined.
C) The quantity decreases but the change in the price cannot be determined.
D) Both the price and quantity decrease.
E) None of the above.
A) Both the price and quantity increase.
B) The price decreases but the change in the quantity cannot be determined.
C) The quantity decreases but the change in the price cannot be determined.
D) Both the price and quantity decrease.
E) None of the above.
answer
C) The quantity decreases but the change in the price cannot be determined.
question
After a major snowstorm last winter, some college students earned extra money by clearing driveways of snow for $25. Town officials determined that $25 was too high and set a price ceiling of $15 for this service. Which of the following was the most likely result?
A) More people were able to purchase and sell this service.
B) People didn't have to wait longer to get their driveway cleared.
C) Fewer driveways were cleared.
D) All of the above.
A) More people were able to purchase and sell this service.
B) People didn't have to wait longer to get their driveway cleared.
C) Fewer driveways were cleared.
D) All of the above.
answer
C) Fewer driveways were cleared.
question
Assuming the demand curve for orange juice shifts to the right (increase in demand), also, assuming the supply curve for orange juice shifts to the right (increase in supply). Assume further that the shifts in both curves are not determined (which means the shift in the demand curve could be wider than the shift in the supply curve, vice versa, or both shifts could be the same). Which of the following would be a certain outcome in the market for orange juice?
A) Higher equilibrium price.
B) Lower equilibrium quantity.
C) Lower equilibrium price.
D) Higher equilibrium quantity.
A) Higher equilibrium price.
B) Lower equilibrium quantity.
C) Lower equilibrium price.
D) Higher equilibrium quantity.
answer
D) Higher equilibrium quantity.
question
Many student government candidates at colleges and universities propose rent controls on local rental housing as a way to help students afford rental housing. Economic theory suggests that this policy would harm students as a whole despite the fact that some students who are able to find housing at the reduced price would benefit. Which of the following are some of the offsetting secondary effects of the rent controls that would work to the disadvantage of students?
A.
There would be a shortage of rental housing, making it very difficult for students to find places to rent and causing increased discrimination in the rental housing market.
B. There would be a reduction in the quality of rental housing.
C. There would be a reduction in the future supply of rental housing.
D. All of these would be secondary effects of the rent controls.
A.
There would be a shortage of rental housing, making it very difficult for students to find places to rent and causing increased discrimination in the rental housing market.
B. There would be a reduction in the quality of rental housing.
C. There would be a reduction in the future supply of rental housing.
D. All of these would be secondary effects of the rent controls.
answer
D. All of these would be secondary effects of the rent controls.
question
A legally mandated minimum wage is an example of:
A.
the invisible hand principle.
B. a price floor.
C. a price ceiling.
D. none of the above.
A.
the invisible hand principle.
B. a price floor.
C. a price ceiling.
D. none of the above.
answer
B. a price floor.
question
Suppose a hurricane hits Florida causing widespread damage to houses and businesses. The governor of
Florida places a price ceiling on all building materials to keep the prices reasonable. Which of the
following is the most likely result?
A) Shortage of building materials. C) A slower recovery from the storm.
B) Long lines at lumber stores. D) All of the above would probably result.
Florida places a price ceiling on all building materials to keep the prices reasonable. Which of the
following is the most likely result?
A) Shortage of building materials. C) A slower recovery from the storm.
B) Long lines at lumber stores. D) All of the above would probably result.
answer
D) All of the above would probably result.
question
The market will overproduce goods that have external costs because:
A) The producers experience lower costs of production.
B) The producers experience higher costs of production.
C) The government can never interfere in these markets.
D) None of the above.
A) The producers experience lower costs of production.
B) The producers experience higher costs of production.
C) The government can never interfere in these markets.
D) None of the above.
answer
A) The producers experience lower costs of production.
question
If the economy relies entirely on the market mechanism, then, it tends to:
A) Overproduce goods that yield external benefits and overproduce those that generate external costs.
B) Overproduce goods that yield external benefits and underproduce those that generate external costs.
C) Underproduce goods that yield external benefits and overproduce those that generate external costs.
A) Overproduce goods that yield external benefits and overproduce those that generate external costs.
B) Overproduce goods that yield external benefits and underproduce those that generate external costs.
C) Underproduce goods that yield external benefits and overproduce those that generate external costs.
answer
C) Underproduce goods that yield external benefits and overproduce those that generate external costs.
question
If Good X is a public good, then:
A) It is not available to anyone.
B) It will be provided by the market system without govt involvement.
C) If it is consumed by one person, it can also be consumed by another person.
D) If it is consumed by one person, it cannot be consumed by another.
A) It is not available to anyone.
B) It will be provided by the market system without govt involvement.
C) If it is consumed by one person, it can also be consumed by another person.
D) If it is consumed by one person, it cannot be consumed by another.
answer
C) If it is consumed by one person, it can also be consumed by another person.
question
Externalities:
A) Occur because of government failure.
B) Are the external costs and/or external benefits of market activities that "spill over" onto third parties.
C) Occur because of selfish consumers.
D) Occur because demand is hidden.
A) Occur because of government failure.
B) Are the external costs and/or external benefits of market activities that "spill over" onto third parties.
C) Occur because of selfish consumers.
D) Occur because demand is hidden.
answer
B) Are the external costs and/or external benefits of market activities that "spill over" onto third parties.
question
If Good X has a social supply curve that is less than the market supply curve, then Good X must be a:
a) Public good.
b) Good with an external cost.
c) Good with no externalities.
d) None of the above.
a) Public good.
b) Good with an external cost.
c) Good with no externalities.
d) None of the above.
answer
b) Good with an external cost.
question
The law of supply states that when the price of a commodity rises, the quantity supplied for that commodity rises too and vice versa, ceteris paribus, which means that:
a. The model includes all important variables occuring in the real world
b. all the supply curve shifters which influence the event are changing at the same time
c. two variables are changing and everything else is being held constant
d. all of the above
a. The model includes all important variables occuring in the real world
b. all the supply curve shifters which influence the event are changing at the same time
c. two variables are changing and everything else is being held constant
d. all of the above
answer
c. two variables are changing and everything else is being held constant
question
Assuming the demand curve for automobiles shifts to the right (increase in demand), also, assuming the supply curve for automobiles shifts to the right (increase in supply). Assume further that the shifts in both curves are not determined (which means the shift in the demand curve could be wider than the shift in the supply curve, vice versa, or both shifts could be the same, a three-diagram scenario!). Which of the following would be a certain outcome in the market for automobiles?
a. A higher market clearing price OR equilibrium price.
b. A lower market clearing quantity or equilibrium quantity
c. A lower market clearing price or equilibrium price
d. A higher market clearing quantity or equilibrium quantity
e. None of the above
a. A higher market clearing price OR equilibrium price.
b. A lower market clearing quantity or equilibrium quantity
c. A lower market clearing price or equilibrium price
d. A higher market clearing quantity or equilibrium quantity
e. None of the above
answer
d. A higher market clearing quantity or equilibrium quantity
question
Which of the following is observed when the number of web designers in the web designing industry decreases? Include both the demand and supply curves in your analysis; and don't shift the demand curve!
a. An increase in the market clearing price and market clearing quantity in the industry
b. An decrease in the market clearing quantity and an increase in the market clearing price
c. An increase in the market clearing quantity and a decrease in the market clearing price
d. A decrease in the market clearing price and market clearing quantity
e. None of the above
a. An increase in the market clearing price and market clearing quantity in the industry
b. An decrease in the market clearing quantity and an increase in the market clearing price
c. An increase in the market clearing quantity and a decrease in the market clearing price
d. A decrease in the market clearing price and market clearing quantity
e. None of the above
answer
b. An decrease in the market clearing quantity and an increase in the market clearing price
question
Which of the following is a macroeconomic statement?
a. A significant number of the new U.S. jobs require college degrees
b. The U.S. inflation rate, on average, is within a reasonable range
c. The unemployment rate in the U.S. is higher than the unemployment rate in the European Union
d. All of the above
a. A significant number of the new U.S. jobs require college degrees
b. The U.S. inflation rate, on average, is within a reasonable range
c. The unemployment rate in the U.S. is higher than the unemployment rate in the European Union
d. All of the above
answer
d. All of the above
question
Imposing a tax on an industry (for example, the automobile industry) by the government would result in:
a. The supply curve will not be affected
b. A rightward shift of the supply curve
c. A leftward shift of the supply curve
d. None of the above
a. The supply curve will not be affected
b. A rightward shift of the supply curve
c. A leftward shift of the supply curve
d. None of the above
answer
c. A leftward shift of the supply curve
question
Assuming Coca-Cola & Pepsi-Cola are substitute goods, the effect of an increase in the price of Coca-Cola would cause which of the following
a. A rightward shift in the demand curve for Coca-Cola
b. A downward movement along the demand curve for Pepsi-Cola
c. A leftward shift in the demand curve for Pepsi-Cola
d. An upward movement along the demand curve for beer
e. A rightward shift in the demand curve for Pepsi-Cola
a. A rightward shift in the demand curve for Coca-Cola
b. A downward movement along the demand curve for Pepsi-Cola
c. A leftward shift in the demand curve for Pepsi-Cola
d. An upward movement along the demand curve for beer
e. A rightward shift in the demand curve for Pepsi-Cola
answer
e. A rightward shift in the demand curve for Pepsi-Cola
question
Which of the following events would allow the production-possibilities curve to shift outward?
a. When more workers enter into the labor force of an economy
b. When a natural gas is explored, extracted, and used by a country
c. When the same number of workers in a labor force become more skilled and educated
d. All of the above
a. When more workers enter into the labor force of an economy
b. When a natural gas is explored, extracted, and used by a country
c. When the same number of workers in a labor force become more skilled and educated
d. All of the above
answer
d. All of the above
question
If an economy is operating at a point inside (below) the production possibilities curve (PPC),
a. Its resources are not being used fully and efficiently
b. An economy can't produce at a point inside (below) the curve
c. The economy is producing at a point that is above (outside) of the PPC.
d. None of the above
a. Its resources are not being used fully and efficiently
b. An economy can't produce at a point inside (below) the curve
c. The economy is producing at a point that is above (outside) of the PPC.
d. None of the above
answer
a. Its resources are not being used fully and efficiently
question
If the equilibrium price of a good X is $6 per unit and a price floor is imposed at $9 per unit, then one of the outcomes of this policy will be a shortage in this market.
answer
F
question
Economics
answer
The study of how people (as individuals or as a society) allocate their limited resources (means) in order to meet their unlimited wants (ends). Therefore, economics is the study of how people make choices. Choice---scarcity
question
Q (Beef in Michigan) = f(P beef, P pork, P chicken, Income, Population)
answer
Economic Model
question
an analysis limited to statements that are verifiable; can be proven by true or false statements; "what is"
answer
Positive Economics
question
an analysis based on value judgment; "what should be"; good, bad, need, should, ought
answer
Normative economics
question
Society's decisions regarding:
answer
what kind, how to produce, who should buy
question
The forgone benefits of the next best available good/service, giving up the opportunity of doing something else (the next best alternative)
answer
Opportunity cost
question
examines the effects of additions to or subtractions from a current situation
answer
Marginal Analysis
question
A curve that shows the maximum combinations of two outputs an economy can produce in a given period of time with its available resources and technology; fixed resources, fully employed resources, and technology unchanged effect the PPC
answer
PPC OR PPF
question
...
answer
Two-goods economy
question
Increased productive capabilities of an economy
answer
Economic growth
question
Institution/agent that connects those who buy and sell goods/services/resources; local, national, international; brought together sellers and buyers
answer
markets
question
choice-making behavior of buyers
answer
demand
question
choice-making behavior of producers/sellers
answer
supply
question
When the price of a good/service rises, people buy less of it, in a given time period, other things being equal (ceteris paribus), and vice versa; quantity demanded has an inverse relationship with its own price
answer
law of demand
question
move along the same curve
answer
changes in quantity demanded
question
When the demand curve shifts (inward or outward - to the left or to the right)
answer
changes in demand
question
number of buyers, tastes and preferences, income, expectations of buyers, price of related goods
answer
demand curve shifters/non-price determinants of demand/other variables
question
goods that have an increase in demand when income of buyers increases
answer
Normal goods
question
goods that have increase in demand when income of buyers decreases
answer
Inferior goods
question
Direct/positive relationship between the price of one good/service and the demand for the other; coke and pepsi
answer
substitute goods
question
Inverse/indirect relationship between the price of one good/service and the demand for the other; blue ray players and blue ray movies
answer
complement goods
question
Sates that there is a direct relationship between the price of good/service & the quantity sellers/producers are willing to make available for sale over a specified time period, other things being constant (ceteris paribus)
answer
law of supply
question
movements along the curve
answer
changes in quantity supplied
question
The supply curve shifts (inward or outward - to the left or to the right)
answer
changes in supply
question
...
answer
supply curve shifters/non-price determinants/other variables
question
the intersection point of the demand and supply curvers
answer
equilibrium
question
excess quantity demanded
answer
shortage
question
excess quantity supplied
answer
surplus
question
shifting the demand curve while the supply curve remains the same; number of buyers, incomes, tastes, prices of other goods
answer
changes in demand
question
shifting the supply curve while the demand curve remains the same; number of sellers, technology, tax, subsidy, factor price
answer
changes in supply
question
An effective price ceiling policy and its expected outcomes
answer
price ceiling
question
an effective price floor policy and its expected outcomes
answer
price floors
question
Price, Profit, Property rights
answer
Market economy: The 3 PS
question
to provide public goods, to correct externalities, to promote/preserve competition, to redistribute income in the society
answer
Market failure and subsequent government intervention
question
efficiently produced by the private business firms through the competitive market system; hamburgers, cars, education
answer
private goods
question
Goods not efficiently produced by the private sector; national defense, the legal system, the war on terrorism
answer
public goods
question
rival in consumption, excludable goods, non-rival in consumption and excludable goods
answer
characteristics of private goods
question
Non-rival in consumption, non-excludable, non-rival in consumption and excludable
answer
characteristics of public goods
question
a cost or benefit imposed on people other than the consumers and producers of a good or service
answer
externalities
question
over-allocation of resources/overproduction; when a third party is affected by 1st and 2nd parties and they are not compensated; pollution (can impose tax on industry)
answer
external costs
question
under-allocation of resources/underproduction; higher education, christmas lights (watching)
answer
external benfits
question
the principle that the opportunity cost increases as production of one output errands
answer
law of increasing opportunity costs
question
the accumulation of capital, such as factories, machines, and inventories, used to produce goods and services
answer
investment
question
simplified description of reality used to understand and predict the relationship between variables
answer
model
question
a movement between points along a stationary demand curve, ceteris paribus
answer
change in quantity demanded
question
an increase or a decrease in the quantity demanded at each possible price. An increase in demand is a rightward shift in the entire demand curve. A decrease in demand is a leftward shift in the entire demand curve
answer
change in demand
question
a curve or schedule showing the various quantities of a product sellers are willing to produce and offer for sale at possible prices during a specified period of time, ceteris paribus
answer
supply
question
a movement between points along a stationary supply curve, ceteris paribus
answer
change in quantity supplied
question
an increase or a decrease in the quantity supplied at each possible price. An increase in supply is a rightward shift in the entire supply curve. A decrease in supply is a leftward shift in the entire supply curve
answer
change in supply
question
a movement between points along a stationary supply curve, ceteris paribus
answer
change in quantity supplied
question
Number of sellers, technology, resource prices, taxes and subsidies, expectations of producers, prices of other goods the firm could produce
answer
non-price determinants of supply
question
a mechanism that uses the forces of supply and demand to create an equilibrium through rising and falling prices
answer
price system
question
a situation in which market equilibrium results in too few or too many resources being used in the production of a good or service. This inefficiency may justify government intervention
answer
market failure
question
regulation and pollution taxes
answer
market failure correction
question
regulation, special subsidies
answer
market failure of aids vaccines
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