Test 1 - Microeconomics - Assignment Essays %

question

If at a price of $15 per pair, the quantity demanded of jogging shoes is 35,000 pairs and the quantity supplied at this price is 20,000 pairs, we can say that:

answer

there is a shortage of 15,000 pairs of jogging shoes.

question

If students experience a decrease in income and the price of gasoline continues to rise, what can you tell me will happen in the market for Florida vacations over Spring Break:

answer

the demand will decrease, the supply will remain the same, and the price will fall.

question

The typical demand curve is:

answer

negatively sloped

question

In illustration 4-D shown below, the equilibrium price is:

answer

$2.00

question

In illustration 4-D shown below, if quantity supplied were to increase by 90 units at each price, the new equilibrium price would be:

answer

$1.50

question

In illustration 4-D shown below, a price ceiling of $1.25 would result in:

answer

a shortage of 135 units

question

This month, Fritter Firm finds that it has been able to sell only 150 fritters at a price of $1.00 per fritter. The previous month, the firm was able to sell 200 fritters at $1.00 per fritter. What most likely happened over the month?

answer

Demand decreased

question

Ticket scalping is selling a ticket for a sporting or entertainment event at a price above the price printed in the ticket. Scalping occurs because:

answer

the printed price is below the equilibrium price

question

A shift in the supply curve of bicycles resulting from lower steel prices will lead to:

answer

lower prices

question

One list below contains only items which are likely to cause the DEMAND CURVE FOR ORANGES TO SHIFT. It includes changes in:

answer

consumer income, grapefruit prices, and consumer preference

question

Which of the following is not an abstraction?

answer

a full schedule for every passenger train in the U.S.

question

On the morning after the stock market mini-crash of October 19, 1987, many pundits reported that "everyone was selling and no one was buying." This statement reflects a basic misunderstanding of:

answer

the nature of a market

question

An individual who makes rational choices:

answer

takes actions which seem to him most likely to help him attain his goals

question

The origin:

answer

is the point on a graph at which the horizontal and vertical axes intersect

question

To present facts about how the unemployment rate change over the last decade, you would probably use:

answer

a time series graph

question

A line that is tangent to a curve:

answer

shares one point with the curve

question

The means of production include:

answer

natural resources, labor, and capital goods

question

Suppose a farmer produces 50 bushels of corm and 10 bushels of peanuts with his resources. According to Table 3-1, the opportunity cost of 10 more bushels of peanuts is:

answer

8 bushels of corn

question

Mikhail Gorbachev wants to shift Soviet production toward consumer goods and to produce all goods more efficiently. In Figure 3-2, such changes might be represented by a move from:

answer

C to B

question

A market system:

answer

solves the "what", "how", and "to whom" decisions

question

Adam Smith was a great economist of the:

answer

18th century

question

Economists define efficiency as:

answer

the absence of waste

question

The demand curve for a good:

answer

connects points describing how much consumers would have been willing and able to buy at different possible prices during a particular period of time

question

Along a supply curve:

answer

quantity supplied changes as price changes

question

In Figure 4-1, at a price of $10.00 there is a:

answer

surplus of 50 t-shirts

question

In Figure 4-1, there would be a shortage of t-shirts if:

answer

the price were below $8.00

question

In order to establish an equilibrium in the market for t-shirts described in Figure 4-1, the government could:

answer

leave the market alone

question

In a free market, at any price below the equilibrium price for a good:

answer

consumers will try to outbid each other for the good

question

To affect the quantity sold of a good, a price ceiling must be:

answer

below the equilibrium price

question

Suppose that the supply curve for compact discs shifted out. For which of the goods below is the demand curve most likely to shift out?

answer

compact disc players

question

Economic models are often expressed:

answer

in any or all of the below:
-in equations
-in words
-in graphs

question

The process of focusing on only the most important factors to explain a phenomenon is called:

answer

abstraction

question

A straight line with slope equal to zero:

answer

is horizontal

question

Which of the curves in Figure 2-6 does NOT have a slope equal to zero at one or more points?

answer

question

Scarcity exists because of:

answer

unlimited wants and limited resources

question

An economist holds a $35,000 a year teaching job. She knows that she could earn $60,000 a year if she quit her job and opened a consulting firm. The opportunity cost of her teaching job is:

answer

$60,000

question

The shape of the production possibilities frontier in Figure 3-1 implies that:

answer

Some resources are better-suited for producing wheat than for producing barley

question

Which of the following represents an inefficient use of resources?

answer

Producing at a point inside the production possibilities frontier

question

Adam Smith wrote about the "invisible hand" in his book:

answer

The Wealth of Nations

question

Adam Smith used the example of the pin factory to discuss the benefits of:

answer

the division of labor

question

Along a given demand curve for a good, which of the following do we NOT consider to be held constant?

answer

the price of the good

question

On a traditional supply and demand diagram:

answer

price is measured along the vertical axis and quantity is measured along the horizontal axis

question

At an equilibrium price for gasoline:

answer

everyone with the desire and the income to buy gasoline at that price can do so

question

At an equilibrium price:

answer

quantity demanded equals quantity supplied

question

Which of the following would be most likely to cause an outward shift of the demand curve for elasticity?

answer

an increase in the price of heating oil

question

The imposition of price ceilings on a market often results in:

answer

the diversion of income towards black-market suppliers

question

Table 4-1 gives information on the supply and demand curves in the market for doodads. The equilibrium price of a doodad is:

answer

$4.00

question

Table 4-1 gives information on the supply and demand curves in the market for doodads. When the doodad market is in equilibrium, how many doodads are sold?

answer

question

Table 4-1 gives information on the supply and demand curves in the market for doodads. If the government imposes a price ceiling of $3.00 a doodad, how many doodads will be sold?

answer

question

Organize the economy by:

answer

-tradition
-command
-market

question

Age of Reason:

answer

Dates: 1750-1855
Setting: Europe
Main Writer: Adam Smith
Viewpoint of the Age: Belief in Natural Law

question

Basic Problems of Scarcity with 5 Sub-problems

answer

Problem:
1. Efficiency - Solution: competition

2. Income Distribution - Solution: The Market Distributes the income to the Four Factors of Production according to their productivity

3. Recession & Depressions - Solution: recessions and depressions are impossible - Say's Law of Markets

4. Economic Growth - Solution: the Nation's savings must be channeled into investment - real capital goods

question

Age of Positivistic Relativism:

answer

Dates: 1855-1929
Setting: Europe
Main Writer: Alfred Marshall
Viewpoint of the Age: Cultural Relativism

question

Markets clear:

answer

means they don't believe in government intervention

question

Age of Keynes: about Keynes

answer

John Maynard Keynes graduated from Cambridge University
-committed to a market system
-his famous book was "The General Theory" - published in 1936
-according to him, government should deficit spend during a depression to get the economy going again

question

Age of Keynes:

answer

Dates: 1929-present
Setting: Europe & U.S.
Main Writer: John Maynard Keynes
Viewpoint of Age: belief in Direct Government Intervention
Consequences of Viewpoint: actively promote change

question

How do you get Market Demand?

answer

sum the individual demand schedules horizontally

question

The price of 16-oz. cans of frozen orange juice falls from $0.89 to $0.69. What happens to the demand for 16-oz. cans of frozen orange juice?

answer

the demand does NOT change

question

Definition of Demand:

answer

demand is a schedule of the quantities which would be purchased at each of several different prices

question

Law of Demand:

answer

-as the price of the product falls, the quantity demand increases
-the relationship between price and quantity demand is inverse or negative

question

Definition of Price Elasticity of Demand:

answer

-price elasticity of demand measures the degree to which the quantity demanded is sensitive to a change in price

question

Taxes on beer, liquor, & cigarettes

answer

taxes on these items can be raised

question

Excise Taxes:

answer

if an excise tax is added to a product for which the demand is fairly inelastic, then the incidence of the tax will land mainly on the consumer

question

If it is elastic?

answer

the price and total revenue move in opposite directions

question

4 factors which change Supply:

answer

1. a change in the number of producers in the market
2. a change in efficiency and/or technology
3. a change in the price of inputs
4. a change in the price of related outputs

question

What are the bad things about price ceilings?

answer

1. they cause shortages
2. they lead to black market
3. they lead to bribery and corruption
4. they lead to deterioration of rental units where price ceilings are in place

question

Diminishing Marginal Utility:
Utility
Marginal
Diminishing

answer

Utility: Want Satisfaction
Marginal: Additional Unit
Diminishing: Declining

question

Defintion of Marginal Utility:

answer

the additional utility that an individual derives by consuming one more unit of any good. We say it is the max about of money he or she is willing to pay for one unit of it.

question

Why does marginal utility diminish?

answer

each additional pound of bananas for Jennifer contributes less to her utility because the use has a lower priority

question

Definition of Indifference Analysis:

answer

the shortcoming of marginal utility analysis is that it conceals the necessity of choice imposed on the consumer by his limited budget

question

Indifference Analysis makes use of 2 geometric devices:

answer

The Budget Line
The Indifference Curve

question

What would happen to the budget line if the price of "X" in our example fell from $3.00 to $2.00?

answer

the budget line would swing out to the right. it would fan out to the right.

question

The consumer should choose the Indifference Curve which is ____________ to the budget line?

answer

tangent

question

Opportunity Cost:

answer

value of the best forgone alternative to any decision
-all actions lead to opportunity cost
-opportunity costs leads to true economic costs

question

The Surprising Principle of Comparative Advantage:

answer

-when 2 nations trade, both benefit
-Comparative Advantage: the production of goods with the lowest opportunity cost
-comparative advantage leads to specialization

question

The Importance of Thinking at the Margin:

answer

-Marginal: small change
-Marginal Cost: change in costs
-Rational Decisions: comparison of costs to benefits at the margin

question

Externalities: Shortcoming of the Market Cured by Market Methods:

answer

-Externalities: effects of transactions on third parties
-Externalities lead to social costs
-Market failure leads to the need for government intervention

question

The Role of Economic Theory:

answer

-Economic Theory: a theory is a deliberate simplification of relationship used to explain how those relationships work. It is an explantation of why economic events occur.
-Correlation does NOT equal Causality
-Economic theories lead to predictions

question

What is an Economic Model?

answer

-Economic Model: formal statement of economic theory
-usually expressed in math, with equations and graphs

question

Production Possibilites Frontier:

answer

-Production possibilites frontier: a graph showing different combinations of output for a given amount of inputs
-more of one good leads to less of another good

question

Principle of Increasing Costs:

answer

increase in production of one good leads to the increase in opportunity cost of producing another unit.
-Reason: inputs tend to be specialized

question

Change in productivity leads to...

answer

shift in the frontier
-skills
-technology
-capital stock

question

Scarcity and Choice for the Entire Society:

answer

-Economic Growth: increase in production of goods and services
-trade of between consumption goods and capital goods
-investment in capital goods shift out the production possibilities frontier

question

What does Efficiency not tell us:

answer

-it does NOT tell us which point is best

question

Adam Smith quote:

answer

quote from The Wealth of Nations regarding productivity increases in the pin factory

1 of 85

question

If at a price of $15 per pair, the quantity demanded of jogging shoes is 35,000 pairs and the quantity supplied at this price is 20,000 pairs, we can say that:

answer

there is a shortage of 15,000 pairs of jogging shoes.

question

If students experience a decrease in income and the price of gasoline continues to rise, what can you tell me will happen in the market for Florida vacations over Spring Break:

answer

the demand will decrease, the supply will remain the same, and the price will fall.

question

The typical demand curve is:

answer

negatively sloped

question

In illustration 4-D shown below, the equilibrium price is:

answer

$2.00

question

In illustration 4-D shown below, if quantity supplied were to increase by 90 units at each price, the new equilibrium price would be:

answer

$1.50

question

In illustration 4-D shown below, a price ceiling of $1.25 would result in:

answer

a shortage of 135 units

question

answer

Demand decreased

question

Ticket scalping is selling a ticket for a sporting or entertainment event at a price above the price printed in the ticket. Scalping occurs because:

answer

the printed price is below the equilibrium price

question

A shift in the supply curve of bicycles resulting from lower steel prices will lead to:

answer

lower prices

question

One list below contains only items which are likely to cause the DEMAND CURVE FOR ORANGES TO SHIFT. It includes changes in:

answer

consumer income, grapefruit prices, and consumer preference

question

Which of the following is not an abstraction?

answer

a full schedule for every passenger train in the U.S.

question

On the morning after the stock market mini-crash of October 19, 1987, many pundits reported that "everyone was selling and no one was buying." This statement reflects a basic misunderstanding of:

answer

the nature of a market

question

An individual who makes rational choices:

answer

takes actions which seem to him most likely to help him attain his goals

question

The origin:

answer

is the point on a graph at which the horizontal and vertical axes intersect

question

To present facts about how the unemployment rate change over the last decade, you would probably use:

answer

a time series graph

question

A line that is tangent to a curve:

answer

shares one point with the curve

question

The means of production include:

answer

natural resources, labor, and capital goods

question

Suppose a farmer produces 50 bushels of corm and 10 bushels of peanuts with his resources. According to Table 3-1, the opportunity cost of 10 more bushels of peanuts is:

answer

8 bushels of corn

question

Mikhail Gorbachev wants to shift Soviet production toward consumer goods and to produce all goods more efficiently. In Figure 3-2, such changes might be represented by a move from:

answer

C to B

question

A market system:

answer

solves the "what", "how", and "to whom" decisions

question

Adam Smith was a great economist of the:

answer

18th century

question

Economists define efficiency as:

answer

the absence of waste

question

The demand curve for a good:

answer

connects points describing how much consumers would have been willing and able to buy at different possible prices during a particular period of time

question

Along a supply curve:

answer

quantity supplied changes as price changes

question

In Figure 4-1, at a price of $10.00 there is a:

answer

surplus of 50 t-shirts

question

In Figure 4-1, there would be a shortage of t-shirts if:

answer

the price were below $8.00

question

In order to establish an equilibrium in the market for t-shirts described in Figure 4-1, the government could:

answer

leave the market alone

question

In a free market, at any price below the equilibrium price for a good:

answer

consumers will try to outbid each other for the good

question

To affect the quantity sold of a good, a price ceiling must be:

answer

below the equilibrium price

question

Suppose that the supply curve for compact discs shifted out. For which of the goods below is the demand curve most likely to shift out?

answer

compact disc players

question

Economic models are often expressed:

answer

in any or all of the below:
-in equations
-in words
-in graphs

question

The process of focusing on only the most important factors to explain a phenomenon is called:

answer

abstraction

question

A straight line with slope equal to zero:

answer

is horizontal

question

Which of the curves in Figure 2-6 does NOT have a slope equal to zero at one or more points?

answer

question

Scarcity exists because of:

answer

unlimited wants and limited resources

question

An economist holds a $35,000 a year teaching job. She knows that she could earn $60,000 a year if she quit her job and opened a consulting firm. The opportunity cost of her teaching job is:

answer

$60,000

question

The shape of the production possibilities frontier in Figure 3-1 implies that:

answer

Some resources are better-suited for producing wheat than for producing barley

question

Which of the following represents an inefficient use of resources?

answer

Producing at a point inside the production possibilities frontier

question

Adam Smith wrote about the "invisible hand" in his book:

answer

The Wealth of Nations

question

Adam Smith used the example of the pin factory to discuss the benefits of:

answer

the division of labor

question

Along a given demand curve for a good, which of the following do we NOT consider to be held constant?

answer

the price of the good

question

On a traditional supply and demand diagram:

answer

price is measured along the vertical axis and quantity is measured along the horizontal axis

question

At an equilibrium price for gasoline:

answer

everyone with the desire and the income to buy gasoline at that price can do so

question

At an equilibrium price:

answer

quantity demanded equals quantity supplied

question

Which of the following would be most likely to cause an outward shift of the demand curve for elasticity?

answer

an increase in the price of heating oil

question

The imposition of price ceilings on a market often results in:

answer

the diversion of income towards black-market suppliers

question

Table 4-1 gives information on the supply and demand curves in the market for doodads. The equilibrium price of a doodad is:

answer

$4.00

question

Table 4-1 gives information on the supply and demand curves in the market for doodads. When the doodad market is in equilibrium, how many doodads are sold?

answer

question

Table 4-1 gives information on the supply and demand curves in the market for doodads. If the government imposes a price ceiling of $3.00 a doodad, how many doodads will be sold?

answer

question

Organize the economy by:

answer

-tradition
-command
-market

question

Age of Reason:

answer

Dates: 1750-1855
Setting: Europe
Main Writer: Adam Smith
Viewpoint of the Age: Belief in Natural Law

question

Basic Problems of Scarcity with 5 Sub-problems

answer

question

Age of Positivistic Relativism:

answer

Dates: 1855-1929
Setting: Europe
Main Writer: Alfred Marshall
Viewpoint of the Age: Cultural Relativism

question

Markets clear:

answer

means they don't believe in government intervention

question

Age of Keynes: about Keynes

answer

question

Age of Keynes:

answer

Dates: 1929-present
Setting: Europe & U.S.
Main Writer: John Maynard Keynes
Viewpoint of Age: belief in Direct Government Intervention
Consequences of Viewpoint: actively promote change

question

How do you get Market Demand?

answer

sum the individual demand schedules horizontally

question

The price of 16-oz. cans of frozen orange juice falls from $0.89 to $0.69. What happens to the demand for 16-oz. cans of frozen orange juice?

answer

the demand does NOT change

question

Definition of Demand:

answer

demand is a schedule of the quantities which would be purchased at each of several different prices

question

Law of Demand:

answer

-as the price of the product falls, the quantity demand increases
-the relationship between price and quantity demand is inverse or negative

question

Definition of Price Elasticity of Demand:

answer

-price elasticity of demand measures the degree to which the quantity demanded is sensitive to a change in price

question

Taxes on beer, liquor, & cigarettes

answer

taxes on these items can be raised

question

Excise Taxes:

answer

if an excise tax is added to a product for which the demand is fairly inelastic, then the incidence of the tax will land mainly on the consumer

question

If it is elastic?

answer

the price and total revenue move in opposite directions

question

4 factors which change Supply:

answer

1. a change in the number of producers in the market
2. a change in efficiency and/or technology
3. a change in the price of inputs
4. a change in the price of related outputs

question

What are the bad things about price ceilings?

answer

1. they cause shortages
2. they lead to black market
3. they lead to bribery and corruption
4. they lead to deterioration of rental units where price ceilings are in place

question

Diminishing Marginal Utility:
Utility
Marginal
Diminishing

answer

Utility: Want Satisfaction
Marginal: Additional Unit
Diminishing: Declining

question

Defintion of Marginal Utility:

answer

the additional utility that an individual derives by consuming one more unit of any good. We say it is the max about of money he or she is willing to pay for one unit of it.

question

Why does marginal utility diminish?

answer

each additional pound of bananas for Jennifer contributes less to her utility because the use has a lower priority

question

Definition of Indifference Analysis:

answer

the shortcoming of marginal utility analysis is that it conceals the necessity of choice imposed on the consumer by his limited budget

question

Indifference Analysis makes use of 2 geometric devices:

answer

The Budget Line
The Indifference Curve

question

What would happen to the budget line if the price of "X" in our example fell from $3.00 to $2.00?

answer

the budget line would swing out to the right. it would fan out to the right.

question

The consumer should choose the Indifference Curve which is ____________ to the budget line?

answer

tangent

question

Opportunity Cost:

answer

value of the best forgone alternative to any decision
-all actions lead to opportunity cost
-opportunity costs leads to true economic costs

question

The Surprising Principle of Comparative Advantage:

answer

-when 2 nations trade, both benefit
-Comparative Advantage: the production of goods with the lowest opportunity cost
-comparative advantage leads to specialization

question

The Importance of Thinking at the Margin:

answer

-Marginal: small change
-Marginal Cost: change in costs
-Rational Decisions: comparison of costs to benefits at the margin

question

Externalities: Shortcoming of the Market Cured by Market Methods:

answer

-Externalities: effects of transactions on third parties
-Externalities lead to social costs
-Market failure leads to the need for government intervention

question

The Role of Economic Theory:

answer

question

What is an Economic Model?

answer

-Economic Model: formal statement of economic theory
-usually expressed in math, with equations and graphs

question

Production Possibilites Frontier:

answer

-Production possibilites frontier: a graph showing different combinations of output for a given amount of inputs
-more of one good leads to less of another good

question

Principle of Increasing Costs:

answer

increase in production of one good leads to the increase in opportunity cost of producing another unit.
-Reason: inputs tend to be specialized

question

Change in productivity leads to...

answer

shift in the frontier
-skills
-technology
-capital stock

question

Scarcity and Choice for the Entire Society:

answer

-Economic Growth: increase in production of goods and services
-trade of between consumption goods and capital goods
-investment in capital goods shift out the production possibilities frontier

question

What does Efficiency not tell us:

answer

-it does NOT tell us which point is best

question

Adam Smith quote:

answer

quote from The Wealth of Nations regarding productivity increases in the pin factory

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Test 1 – Microeconomics

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