Eco01L1
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Eco01L1 1 Economics may be defined as the science that explains _____________. the choices that we make as we cope with scarcity the decisions made by politicians the decisions made by households all human behavior
2 Scarcity is a situation in which ______________________. wants exceed the resources available to satisfy them something is being wasted people are poor there is a shortage of something
3 Economic choices can be summarized in five big questions. They are _____________________. what, how, who, where, and would you please why, what, how, when, and where what, how, when, where, and why what, how, when, where, and who
4 By remaining in school, you are paying an opportunity cost that includes ___________________. the money you spend on CDs the wages you could earn if you took a job the money you spend on clothes the money you spend on food and drink
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Eco01L1
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5 Making a decision at the margin means ____________________. letting someone else choose for you deciding to do a little bit more or a little bit less of an activity making an all-or-nothing choice waiting until the last minute to make a choice
6 If the cost of textbooks rises by a large amount, you have an incentive to __________________. take a longer vacation buy fewer books and share with your friends buy more books, because they are now more valuable buy the same number of books
7 When you buy a can of coke ___________________. you gain, but the seller loses if you buy the coke after midnight you gain and the seller gains the seller gains but you lose because you have to pay for the coke the seller gains but you gain only if it is a hot day
8 An example of market failure is when ________________________. the price of coffee rises a single producer controls a market and cuts output to raise price the wages of fast food workers fall credit card interest rates rise
9 When productivity increases _____________________.
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Eco01L1
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prices rise living standards improve there are fewer good jobs living standards deteriorate
10 Macroeconomics is the study of ________________________. all aspects of scarcity the national economy and the global economy as a whole big businesses the decisions of individual businesses and people
11 The task of economic science is to _________________________. save the earth from the overuse of natural resources help us to understand how the economic world works tell us what is good for us make moral choices about things like drugs
12 Economists make progress by ________________________. lobbying politicians for more money building and testing economic models asking people how they feel about things asking people whether they are better off or worse off
13 Ceteris paribus means ____________________________.
equal access to public transportation other things being equal
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Eco01L1
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holding everything constant all things considered
14 Which statement is an example of the fallacy of composition? There should be equal access to public transportation. If one fishing boat limits its catch, more fish will survive. Christmas shopping causes Christmas. Hold everything constant except the price of juice.
15 Economists generally agree that ____________________________. taxes have no significant effects rent ceilings cut the availability of housing taxes are too high taxes are too low
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eco02L1
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eco02L1 1 At point a on the graph, the value of variable x is ______ and the value of variable y is _______.
20; 20 -20; 20 -20; -20 20; -20
2 The dots in the figure shows that as the value of variable x increases, the value of variable y ___________________.
increases decreases remains constant increases and then decreases
3
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eco02L1
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The dots in the figure show that as the value of variable x increases, the value of the variable y ______________.
decreases remains constant increases increases and then decreases
4 The figure is a __________________________.
misleading graph scatter diagram cross-section graph time-series graph
5 A trend ______________________. is a general tendency for the value of a variable to rise or fall can be seen easily on a cross-section graph
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eco02L1
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has an increasing slope shows the relationship between two economic variables
6 The figure shows the number of people in a country in different age groups. This figure is an example of _______________________.
a times-series relationship a cross-section graph a times-series graph a scatter diagram
7 An inverse relationship ____________________________________. is one between two opposite variables such as employment and unemployment is the same as a negative relationship can be seen easily on a cross-section graph always has one axis with an inverted scale
8 In the figure, the relationship between x and y is ________________.
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eco02L1
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negative both positive and negative positive non-existent
9 The slope of a relationship is the _____________ of the variable measured on the ___ -axis divided by the _____________ of the variable measured on the ___ -axis. value; x; value; y change in the value; y; change in the value; x change in the value; x; change in the value; y value; x; value; y
10 A graph having two axes _________ show the relationship between 3 variables _______________________. can; only if the slope of the curve remains constant can; only if one variable remains constant can; only if two variables increase at the same rate cannot; ever
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Eco02L2
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Eco02L2 1 As you move from point a to point b in the figure, the value of variable y ___________ and the value of variable x ______________.
increases; decreases decreases; decreases decreases; increases increases; increases
2 To compare the unemployment rate of teenagers with the unemployment rate of workers in other age groups, you would use a ________ graph. cross-section two-variable time-series one-variable
3 The table gives information about the relationship between two variables, x and y. The relationship between x and y is _______ and the slope of the relationship __________.
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Eco02L2
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negative; falls negative; remains constant positive; rises positive; remains constant
4 The figure shows the economic growth rate of France from 1988 to 1997. The growth rate of France has ___________________________.
generally increased over time increased and then decreased generally decreased over time been fairly constant over time
5 In the figure, the unemployment rate was lowest in ________ and decreased fastest between ______________.
1996; 1993; and 1994 1998; 1995; and 1996 1994; 1996; and 1997 1997; 1997; and 1998
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Eco02L2
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6 The slope of the line in the figure is __________.
1 4/6 -4/6 -1
7 In the figure, as the value of x increases, the slope of the line __________________________.
increases remains the same decreases can't be calculated
8 When the value of x in the figure rises from 2 to 4, the slope cross the arc is ______.
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Eco02L2
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3 6 -6 -3
9 When x equals 3, the slope of the curve in the figure is ___________.
6 3 8 4
10 The table shows income, price per computer, and number of computers purchased per year. When computer prices remains the same, the relationship between income and the number of computers purchased per year _________________.
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Eco02L2
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is negative reaches a maximum and then decreases is positive initially and then negative is positive
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Eco03L1
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Eco03L1 1 Scarcity arises when our ____________________________. resources exceed our wants resources are limited wants exceed our resources wants are unlimited
2 Our productive resources include all the following except the __________________. land, skill of people, and machines owned by firms land, entrepreneurship, and human capital the money people own and the consumption goods that they buy skill of entrepreneurs and people, the land they own, and their capital
3 The production possibility frontier separates _____________________________. the types of goods that can be attained from those that can't be unattained the goods and services that people want from those that they do not want the quantities of goods and services that can be produced from those that cannot be produced the combinations of goods that people value and those that they don't
4 When production is efficient, ____________________________. we can satisfy our wants, but we incur an opportunity cost our choice of the goods to produce has no opportunity cost we are willing to buy the goods produced as the opportunity cost is low we face a tradeoff and incur an opportunity cost
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Eco03L1
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5 As we move along the bowed-out production possibility frontier, producing more tacos and less pizza, the opportunity cost of a taco ________________.
remains the same decreases increases and then decreases increases
6 Beth eats two tacos for lunch. The marginal benefit that Beth gets from the second taco is the ________________________. maximum amount that she is willing to pay for two tacos opportunity cost of producing two tacos maximum amount that she is willing to pay for the second taco opportunity cost of producing the second taco
7 Economic growth comes from ________________________. producing more goods than people want to consume capital accumulation and the avoidance of opportunity cost people willing to increase their skills in which case, economic growth is free capital accumulation and technological advance
8 Tom and Di grow tomatoes and turnips. Tom has a comparative advantage in growing tomatoes if _________________.
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Eco03L1
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his marginal benefit from tomatoes is greater than Di's his opportunity cost of tomatoes is less than his opportunity cost of turnips Tom can grow more tomatoes than Di can his opportunity cost of tomatoes is less than Di's opportunity cost of tomatoes
9 If Tom and Di specialize in producing the goods in which he and she have a comparative advantage and they exchange goods, then ____________________. they will lose as they produce only one good each one of them will gain and the other will lose each can produce a combination of goods that is outside her/his production possibility frontier each will have a combination of goods that is outside her/his production possibility frontier
10 Two social institutions that are essential for trade to be organized are _____________________. property rights and laws markets and banks businesses and banks markets and property rights
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Eco03L2
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Eco03L2 1 Capital is _________________. a special resource that organizes the other resources any good with a long life the money that firms have to spend the goods that can be used to produce other goods and services
2 Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides without producing fewer boat rides. Harry is ___________________his production possibility frontier. producing on moving along producing outside producing inside
3 Production efficiency occurs when production _______________________. is at any attainable point is specialized is on the production possibility frontier or inside it of more of any good requires producing less of some other good
4 The figure shows Roger's production possibility frontier. Point a is an ___________________ point and production is ___________________.
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Eco03L2
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unattainable; inefficient unattainable; efficient attainable; efficient attainable; inefficient
5 Vicky currently produces at point a in the figure. If Vicky moves from point a to point b, her opportunity cost of a modem _______________________.
decreases is zero remains the same increases
6 A country produces only pencils and erasers. Pencil production is efficient if the marginal _____________ of a pencil equals the marginal _________ of ___________. cost; benefit; an eraser cost; cost; an eraser benefit; benefit; an eraser
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Eco03L2
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benefi; cost; a pencil
7 When economic growth occurs, the production possibility frontier shifts inward production possibility frontier shifts outward economy moves along its production possibility frontier opportunity cost of all goods decreases
8 In an hour, Andy can make either 6 pizzas or 12 pies and Chris can make either 6 pizza or 18 pies. _____________________________advantage in making pizzas. Chris has an absolute Chris has a comparative Andy has a comparative Andy has an absolute
9 Anna and Maria produce shirts and ties. The figure shows Anna's PPF and Maria's PPF. Anna and Maria can reap the gains from trade if Anna produces _______ and Maria produces __________.
shirts; ties only ties; shirts and ties ties; shirts
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Eco03L2
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shirts and ties; only ties
10 Big Lobster sells lobster and fish, and so too does H Salt. If Big Lobster's opportunity cost of preparing lobster exceeds H Salt's opportunity cost, then all the following are true except H Salt has a comparative advantage in lobster. Big Lobster has a comparative advantage in lobster. They will both gain if Big Lobster sells fish and H Salt sells lobster. H Salt doesn't have a comparative advantage in cooking fish.
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Eco03L3
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Eco03L3 1 The figure shows Freda's PPF. Freda currently produces 10 packets of fudge and no cookies. If Freda decides to produce 1 packet of cookies, her opportunity cost of the packet of cookies is _______of fudge.
0 packets 1/2 packet 2 packets 1 packet
2 Joe's hot dog stand can produce hot dogs and hamburgers. The table gives Joe's production possibilities. The opportunity cost of _________________________.
1 hamburger is 10 hot dogs the 20th hot dog is 1 hamburger. the first 10 hot dogs is 20 hamburgers the 40th hamburger is 10 hot dogs
3
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Eco03L3
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As Rainclouds Inc. moves along its production possibility frontier in the direction of the arrow in the figure, the opportunity cost of a raincoat _____________________.
decreases increases remains the same depends on the initial quantity produced
4 Victor currently produces nuts and bolts at point a in the figure. Victor's marginal cost of producing an additional nut is ________.
8/6 bolts 1 bolt 1/2 bolt 8 bolts
5 The table shows the marginal benefit from pizza and the marginal cost of pizza in cans of soda forgone. At the quantity of pizza produced, the quantity of soda that people are willing to give up to get a pizza is less than the quantity of pop that they must give. The quantity of pizzas produced is ________ a day.
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Eco03L3
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50 40 30 any quantity less than 50
6 An economy that uses new technology ___________________________. experiences economic growth but incurs an opportunity cost moves along its PPF and incurs an opportunity cost does not incur an opportunity cost does not need to accumulate capital so economic growth is free
7 In March 1999, a factory used new technology to produce its output. Then in August 1999, a fire destroys half the factory. The new technology shifted the factory's PPF _________ and the fire shifted it __________.
outward; inward outward; outward inward; outward inward; inward
8 In one day, Sue can change the oil on 15 cars or the tires on 10 cars. In one day, Fred can change the oil on 12 cars or the tires on 10 cars. Sue's opportunity cost of changing oil is _______ than Fred's and her opportunity cost for changing tires is _______ than Fred's. less; greater less; less
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Eco03L3
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greater; less greater; greater
9 In one day, Sue can change the oil on 15 cars or the tires on 10 cars. In one day, Fred can change the oil on 12 cars or the tires on 10 cars. Sue and Fred can gain from trade if Sue changes the _______ and Fred changes the _______. oil; tires tires; tires oil; oil tires; oil
10 A country that has an absolute advantage in producing all goods will usually ______________. have a comparative advantage in some goods but not all have a comparative advantage in all goods produce all goods at lowest opportunity cost not gain from specialization and trade
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Eco03L4
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Eco03L4 1 The opportunity cost of moving from point a to point b in the figure
is zero. 3/2 pairs of socks per sweater. 3 pairs of socks. 2 sweaters.
2 An economy produces at point a on the PPF shown in the figure. A drought reduces the amount of wheat produced and the economy produces at point b. The opportunity cost of a unit of wheat
increases. is impossible to calculate without numbers on the axes. remain the same.
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Eco03L4
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decreases.
3 The opportunity cost of producing a unit of consumption at point a in the figure ________________ point b.
is the same as is greater than at is less than at cannot be compared with
4 Leisure Land produces only sun screen and camel rides. The table shows the marginal benefit and marginal cost schedules for sun screen and camel rides. All the following are efficient except
the fifth ride should not be offered. only two rides should be offered per day. the third camel rides should be taken. the fourth ride should be taken.
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Eco03L4
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5 Two countries, Alpha and Beta, have identical production possibility frontiers. If Alpha produces at point a and Beta produces at point b,
Alpha's and Beta's economic growth rates will be the same. Alpha consumes less than Beta today, but it will grow faster than Beta. Beta's economic growth rate will exceed Alpha's. Beta's future consumption will be greater than Alpha's.
6 As a country that has a bowed-out production possibility frontier produces more of the good in which it has a comparative advantage, the opportunity cost of a unit of that good remains the same. might increase or decrease. decreases. increases.
7 Two countries, Blue Violet and Orange Rose, produce only two goods: teapots and coffeepots. The table gives their production possibilities. ____________has a comparative advantage in teapots and _____________ has a comparative advantage in coffeepots.
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Eco03L4
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Orange Rose; Orange Rose Orange Rose; Blue Violet Blue Violet; Blue Violet Blue Violet; Orange Rose
8 Two countries, Blue Violet and Sweet Pansy, produce only two goods: teapots and coffeepots. The table gives their production possibilities:
Sweet Pansy has a comparative advantage in teapots. Sweet Pansy has an absolute advantage in teapots. Both have a comparative advantage in teapots. Blue Violet has a comparative advantage in teapots.
9 Two countries, Blue Violet and Sweet Pansy, produce only two goods: teapots and coffeepots. The table gives their production possibilities. With specialization and trade, Sweet Pansy produces _______________ and Blue Violet produces ________________.
150 coffeepots, 150 teapots 150 teapots, 75 coffeepots 100 teapots and 25 coffeepots, 100 teapots and 50 coffeepots 150 teapots and 150 coffeepots, nothing
10 A country that has a comparative advantage in producing capital goods will __________________ a country that has a comparative advantage in consumption goods.
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Eco03L4
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specialize in producing capital goods and trade with reap all of the gains from trade with reap more of the gains from trade with grow faster than
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Eco04L1
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Eco04L1 1 A relative price is a price expressed in terms of money. what you get paid for babysitting your cousin. the ratio of one money price to another. equal to a money price.
2 The quantity demanded of a good or service is the amount that consumers plan to buy during a given time period at a given price. firms are willing to sell during a given time period at a given price. a consumer would like to buy but might not be able to afford. is actually bought during a given time period at a given price.
3 The quantity demanded of a good or service is the amount that consumers plan to buy during a given time period at a given price. firms are willing to sell during a given time period at a given price. a consumer would like to buy but might not be able to afford. is actually bought during a given time period at a given price.
4 Demand is the unlimited wants of consumers. entire relationship between the quantity demanded and the price of a good. willingness to pay for a good if income is large enough. ability to pay for a good.
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Eco04L1
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5 If, as people's incomes increase, the quantity demanded of a good decreases, the good is called a substitute. a normal good. an inferior good. a complement.
6 The quantity of Walkmans that people plan to buy this month depends on all of the following except the price of CD players. price of a Walkman. quantity of Walkmans that producers plan to sell. price of tapes.
7 The quantity supplied of a good or service is the amount that is actually bought during a given time period at a given price. producers wish they could sell at a higher price. producers plan to sell during a given time period at a given price. people are willing to buy during a given time period at a given price.
8 Supply is the limited resources available. cost of producing a good. entire relationship between the quantity supplied and the price of a good. willingness to produce a good if the technology to produce it becomes available.
9
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Eco04L1
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The quantity of Walkmans that firms plan to sell this month depends on all of the following except the number of producers of Walkmans. price of a Walkman. quantity of Walkmans that people plan to buy. wages of workers in electronics factories.
10 If the price of the Walkman is below the equilibrium price, there will be a ________ of Walkmans and the price will _____ surplus; fall shortage; fall shortage; rise surplus; rise
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Eco04L2
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Eco04L2 1 The price of a tomato increases and people buy fewer onions. You infer that onions and tomatoes are _________________. normal goods complements substitutes inferior goods
2 The quantity of a cars that people plan to buy this month depends on all of the following except the __________________. quantity of cars that dealers have for sale price of a van population expected future price of a car
3 Kelly graduates and her income increases by $25,000 a year. Other things remaining the same, she decreases the quantity of donuts she buys. For Kelly, donuts _____________________________. are an inferior good and coffee has become complements and toast have become substitutes are a normal good
4 Students can rent a video at Campus Video for $4. As the price of a VCR decreases, the demand for videos will increase.
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Eco04L2
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supply of videos will decrease. quantity supplied of videos will decrease. quantity demanded of videos will increase.
5 In the book market, the supply of books will decrease if any of the following occur except a decrease in the number of book publishers. a decrease in the price of a book. an increase in the future expected price of a book. an increase in the price of paper.
6 If the price of a video rental is below the equilibrium price, the quantity supplied is _______ than the quantity demanded. If the price of video rentals is above the equilibrium price, the quantity supplied is _______ than the quantity demanded. less; greater greater; greater greater; less less; less
7 A typewriter is an inferior good. As people's incomes increase and other things remain the same, you predict that the price of a typewriter will decrease. price of a typewriter will fall and the demand for typewriters will increase. demand for typewriters will decrease and the price will rise. demand for typewriters will increase as the price of a typewriter falls.
8 The figure illustrates the market for pens. The equilibrium quantity is
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Eco04L2
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500 pens a month. between 400 and 600 pens, but it is impossible to be precise. 2 pens a month. 5 pens a month.
9 If the demand for bottled water increases, the equilibrium price rises and the equilibrium quantity increases. rises and the equilibrium quantity increases. falls and the equilibrium quantity decreases. rises and the equilibrium quantity decreases.
10 The figure illustrates the market for chairs. If the price of a chair is $40, there is a
shortage of chairs and the price will rise. surplus of chairs and the price will rise. shortage of chairs and the price will fall. surplus of chairs and the price will fall.
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Eco04L3 1 An ice cream cone costs $1.50. A can of soda costs 75¢. The relative price of an ice cream cone is 75¢. 2 cans of soda. $1.50. 1/2 can of soda.
2 Chicken and fish are substitutes. If the price of chicken increases, the demand for fish will increase or decrease but the demand curve for chicken will not change. increase and the demand curve for fish will shift rightward. not change but there will be a movement along the demand curve for fish. decrease and the demand curve for fish will shift leftward.
3 An increase in the number of sellers of bikes will increase the the price of a bike. demand for crash helmets, a complement of bikes. the supply of inline skates. demand for inline skates, a substitute for bikes.
4 In the market for fertilizer, an increase in the wage rate will increase the demand for fertilizer. advance in technology will increase the supply of fertilizer. increase in the wage rate will increase the supply of fertilizer. increase in the cost of equipment will increase the supply of fertilizer.
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Eco04L3
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5 The table shows the demand and supply schedules for jeans:
At $80 a pair, there is a shortage of jeans and the price will fall. At $70 a pair, there is a surplus of jeans and the price will fall. At $50 a pair, there is a surplus of jeans and the price will rise. At $70 a pair, there is a shortage of jeans and the price will fall.
6 The figure illustrates the market for chocolates. At $8 a box, there is a
surplus of chocolates and the price will fall. shortage of chocolates and the price will fall. shortage of chocolates and the price will rise. surplus of chocolates and the price will rise.
7 You observe that the price of coffee has increased and the quantity has also increased. You predict that the demand for coffee has increased with no change in the supply of coffee. has increased but it is not as large as the increase in supply. has not changed but that the supply of coffee has decreased.
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Eco04L3
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has increased less than supply of coffee has decreased.
8 Potato chips and popcorn are substitutes. A rise in the price of potato chips will ___________the demand for popcorn and the quantity of popcorn will ______________. increase; increase increase; decrease decrease; decrease decrease; increase
9 An increase in the wage rate paid to workers in the popcorn industry will _________________ popcorn and the equilibrium quantity of popcorn will _________________. decrease the supply of; decrease decrease the supply of; increase increase the demand for; increase decrease the demand for; decrease
10 If the supply of bottled water decreases, the equilibrium price ________________________ and the equilibrium quantity __________________. increases; decreases decreases; increases decreases; decreases increases; increases
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Eco04L4
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Eco04L4 1 If income increases and the price of a CD player falls, the price of a CD will rise and the quantity of CDs bought will decrease. fall and the quantity of CDs bought will increase. rise and the quantity of CDs bought will not change. rise and the quantity of CDs bought will increase.
2 The table gives the demand and supply schedules for boat rides. If the demand for boat rides increases by 20 rides a day, the price will
rise to $6 a ride. fall to $6 a ride. remain unchanged. rise to $10 a ride.
3 A processor of alligator hides can produce either purses or shoes. If the demand for alligator shoes increases, then the demand for purses will increase. demand for purses will decrease. supply of purses will increase. supply of purses will decrease.
4
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The figure illustrates the demand for and supply for jeans. Suppose that the price of the material used to make jeans increases but that initially the price of a pair of jeans remains at $50. The quantity demanded is _________________than the equilibrium quantity and there is a ____________ of jeans.
less; surplus greater; surplus less; shortage greater; shortage
5 During an unusually hot summer, the demand for soft drinks increases while the supply of soft drinks remains the same. The price of a soft drink rises and the quantity supplied decreases. rises and the supply of soft drinks increases. rises and the quantity supplied increases. falls and the supply of soft drinks decreases.
6 In the apple market, the demand and supply of apples increase by the same amount. The equilibrium quantity will________ and the equilibrium price will _______. increase; fall remain the same; rise remain the same; either rise or fall increase; not change
7 Apple juice and orange juice are substitutes in consumption and apple juice and apple
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sauce are substitutues in production. If the price of orange juice ___________ or the price of apple sauce __________, then the price of apple juice will ________________. increases; increases; increase decreases; decreases; increase decreases; increases; decrease increases; decreases; increase
8 In the market for bananas, the price is $2.00 a bunch. An increase in the demand for bananas increases the price of bananas and increases the quantity of bananas supplied. and increases the supply of bananas. but as the quantity supplied increases the price falls. and creates a surplus of bananas.
9 An increase in the demand for computers and an increase in the number of sellers of computers will increase the number of computers bought. decrease the price but increase the number of computers bought. increase the price of a computer. increase the price and the number of computers bought.
10 If good growing conditions increases the supply of strawberries and hot weather increases the demand for strawberries, the quantity of strawberries bought increases and the price might rise, fall or not change. doesn't change but the price rises. doesn't change but the price falls. increases and the price rises.
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1 The price elasticity of demand is equal to the ____________ in the _____________ divided by the ________________ in the ______________. change; price; change; quantity demanded percentage change; price; percentage change; quantity demanded change; quantity demanded; change; price percentage change; quantity demanded; percentage change; price
2 When the percentage change in quantity demanded is greater than the percentage change in price, the demand for the good is ________________. unit elastic inelastic perfectly inelastic elastic
3 When the demand for a good is perfectly inelastic, ___________________________. total revenue is as large as possible the price elasticity of demand is zero the demand curve for the good is horizontal the price elasticity of demand is greater than 1
4 If the demand for a good is inelastic, the price elasticity of demand is ____________________. less than zero between 0 and 1 greater than 1 equal to 1
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5 If the demand for a good is perfectly elastic, the price elasticity of demand is ______________ and the demand curve is ___________________. zero; vertical infinite; horizontal infinite; vertical zero; horizontal
6 When the supply of a good decreases, the price of the good __________ and total revenue from the sale of the good _______________. falls; can either increase or decrease rises; can either increase or decrease rises; always increases rises; always decreases
7 When the demand for a good is elastic and its price increases, the total revenue from the sale of the good will _____________. increase initially and then decrease decrease increase not change
8 Because toothpaste and toothbrushes are complements, the ____________ elasticity of demand is ______________. income; positive cross; negative cross; positive income; negative
9
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Haircuts and taxi rides are normal goods, so their ____________________. cross elasticity of demand is negative income elasticities of demand are positive cross elasticity of demand is positive income elasticities of demand are negative
10 A luxury is a good or service with a demand that is _____________ and a necessity is a good or service with a demand that is _____________. cross inelastic; cross elastic income elastic; income inelastic income inelastic; income elastic cross elastic; cross inelastic
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Eco05L2 1 The price of a bus ride decreases, but the total revenue of the bus company does not change. The demand for bus rides is _____________________. unit elastic inelastic elastic perfectly inelastic
2 Marvin loves chocolate truffles. As the price of a chocolate truffle increases from $1 to $2 to $3, Marvin continues to buy a dozen chocolate truffles every week. Marvin's demand for chocolate truffles is _______________. elastic perfectly inelastic illustrated by a horizontal demand curve unit elastic
3 Dan sells newspapers. Dan says that a 10 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is ______________. perfectly elastic elastic inelastic unit elastic
4 When demand is __________, a decrease in price _____________ total revenue. unit elastic; increases
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elastic; decreases elastic; increases inelastic; increases
5 Webster Dictionaries and Oxford Dictionaries are almost perfect substitutes. The price elasticity of demand for Webster Dictionaries ____________________. is 1 is almost infinity depends on the complements for dictionaries is almost zero
6 Blue pens and black pens are close substitutes. The cross elasticity of demand for black pens with respect to the price of blue pens is ________________. equal to 1 zero positive negative
7 If the cross elasticity of demand between goods X and Y is positive and between goods X and Z is negative, then X and Y are ______________ and X and Z are ________________. price inelastic; complements price inelastic; income elastic substitutes; complements complements; substitutes
8 Of the following goods, the North American demand for ______________ has the largest income elasticity of demand. rice
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Mediterranean cruises newspapers compact cars
9 As Mary's income increases by 20 percent, her demand for tickets to National Hockey League games increases by 10 percent. Mary's demand for tickets is _______; for Mary, hockey tickets are __________ good. inelastic; an inferior elastic; a normal inelastic; a normal elastic; an inferior
10 The supply of lettuce in the short run will be ___________ than the supply in the long run and ______________ than the supply today. more elastic; more elastic less elastic; less elastic less elastic; more elastic more elastic; less elastic
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Eco05L3 1 The figure shows the demand curve for popsicles. The price elasticity of demand when the price of a popsicle increases from $0.30 to $0.50 is _________.
0 2 1/2 1
2 The figure illustrates Anne's demand for books. At _________________ a book, Anne's demand for books is elastic.
all prices below $30 all prices between $10 and $15 $15 all prices between $15 and $30
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3 Cola has more close substitutes than do soft drinks. The price elasticity of demand for cola is _______ the price elasticity of demand for soft drinks. greater than a lot less than the same as less than
4 The figure illustrates the demand for eggs. At what price will egg sellers maximize their total revenue?
$0.75 a dozen above $0.75 a dozen less than $0.75 a dozen $1.50 a dozen
5 The price elasticity of demand for videos is 4. If the price of a video increased by 2 percent, the quantity demanded will ___________________. decrease by 8 percent decrease by 0.5 percent increase by 8 percent decrease by 2 percent
6 Sara's Strawberry Market maximizes its total revenue by selling strawberries for $1.25 a
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basket. At a price of $1.25, you predict that ______________. the demand for strawberries is unit elastic the demand for strawberries is elastic the demand for strawberries is inelastic Sara's sells all the strawberries that it grows
7 Donuts and coffee are complements. When the price of a donut increases, the demand for coffee __________ and the cross elasticity of demand for coffee with respect to the price of a donut is _____________. decreases; negative increases; positive increases; negative decreases; positive
8 If when income increases by 15 percent increase and the price does not change the quantity of airplane travel demanded increases by 60 percent, then the income elasticity of demand of airplane travel is _________. 4.00 0 negative 0.25
9 The figure shows the relationship between Moira's income and the quantity of macroni that she demands. When income is less than $350 per month, macaroni ______________________.
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is a normal good has negative income elasticity has many substitutes is an inferior good
10 The table gives some data on the supply of roses in a small town. When the price rises from $15 a dozen to $25 a dozen, the elasticity of supply is ___________.
0.20 0.80 1.25 5.00
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Eco05L4 1 The figure illustrates the demand for hamburgers. When the price is $1.00 a hamburger, the elasticity of demand is __________ and a 1 percent increase in the price will _________ the quantity of hamburgers demanded by __________ percent.
5.00; decrease; 5.00 2.50; increase; 2.50 1.00; decrease; 0.40 0.40; decrease; 0.40
2 A decrease in the supply of sugar increases the price from $0.95 a packet to $1.05 a packet. The quantity decreases from 55 packets a day to 45 packets a day. The price elasticity of demand of sugar is ______. 2.0 -0.5 0.5 -2.0
3 Suppose that taxation accountants increase the price for their service by 20 percent. The short-run demand for their service is less elastic than the long-run demand because in the long run consumers will ________________. find other ways to calculate the income tax they must pay
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try to avoid paying their income tax spend less on this service experience an increase in income
4 The figure illustrates the demand for magazines. Newsagents will maximize their total revenue when they ________________________.
sell 375 magazines a day sell as many magazines as it can charge $2.50 a magazine sell 750 magazines a day
5 When the price of a Caesar salad is $5.00, the demand for Caesar salads is elastic, and when the price is $4.00, the demand is unit elastic. If Mike's Roadside Restaurant cuts the price from $5.00 to $4.00, its total revenue from Caesar salads ___________________. will increase will remain the same will decrease might increase, decrease, or remain the same
6 The figure illustrates the demand for peanuts. If the price falls from $12 to $9 a bag, total revenue will ______________, but if the price rises from $3 to $6 a bag, total revenue will ______________.
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increase; increase decrease; decrease decrease; increase increase; decrease
7 If tea and coffee are substitutes, the cross elasticity of coffee with respect to the price of tea will be _________ and an increase in the price of tea will _________ the demand for coffee. positive; increase negative; decrease negative; increase positive; decrease
8 If a 5 percent increase in the price of good A leads to a 4 percent decrease in the demand for good B, then __________________.
the goods are complements only one good is a normal good both goods are normal goods the goods are substitutes
9 The income elasticity of demand of vacations is 5. If incomes increase by 3 percent next year, the quantity of vacations demanded at today's price will increase by _________ percent. 15
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5/3 3 5
10 If a 10 percent change in the price of a good leads to a 5 percent change in the quantity supplied, then the supply of the good is _______________ and the elasticity of supply is _____________. inelastic; 0.5 elastic; -2.0 inelastic; -0.5 elastic; 2.0
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Eco06L1 1 If a country cannot produce more of one good without producing less of another good that people value more highly, then _____________________. resource use is efficient the opportunity cost is the lowest possible resource use is inefficient the resources used have the highest possible value
2 Marginal benefit is the benefit received from ______________________. producing the efficient quantity consuming the efficient quantity consuming one more unit of a good or service consuming more goods or services
3 Marginal cost is the value of the _________________________. marginal benefit equilibrium quantity best alternative forgone efficient production
4 The value of a tub of ice cream equals all of the following items except the ___________________. maximum price that people are willing to pay for it marginal benefit from consuming it price paid for the tub plus the consumer surplus from it
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price paid for the tub
5 Consumer surplus is the ____________________________. total cost paid by consumers value of the good minus its price the number of goods sold times the market price greatest when price increases
6 Producer surplus is the price of the good _____________________________. times the quantity sold subtracted from the value of the good minus its opportunity cost of production plus the consumer surplus
7 Utilitarianism is a principle whose goal is _______________. equal happiness for all workers equal pay for equal work the greatest happiness for the greatest number the greatest pay for the greatest number
8 A cost borne not by the producer but by other people is called _____________ cost. an opportunity a marginal an external a consumer
9
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An external benefit is a benefit that _________________. is greatest at the equilibrium point experiences increasing marginal returns accrues to someone other than the buyer of a good always equals external cost
10 At inefficient levels of production, __________________________________. deadweight loss occurs the market price is greater than the monopoly price producer surplus is greater than consumer surplus consumer surplus is greater than producer surplus
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Eco06L2 1 If you increase your consumption of soda by one additional can a week, your marginal benefit of this last can is $1.00. The __________ of this last can of soda is $1.00. opportunity cost value price marginal cost
2 Which of the following statements is false? Marginal cost increases as the quantity produced increases. At the efficient quantity, marginal benefit equals marginal cost. Marginal benefit decreases as the quantity consumed increases. If marginal benefit exceeds marginal cost, production is efficient.
3 If the market price of a chair decreases, but the demand for chairs remains the same, then the consumer surplus will _____________________. equal producer surplus decrease remain the same increase
4 In the market for CDs, the producer surplus will decrease if _____________________. the opportunity cost of a CD decreases the market price of a CD increases the supply of CDs increases
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the supply of CDs decreases
5 In a competitive market, which of the following statements is wrong? The willingness to pay for a good is the same as the value of the good. The minimum supply price is the same as opportunity cost. The marginal benefit is the same as opportunity cost. The value of the good is the same as marginal benefit.
6 If resources are used efficiently, then ________________________. consumer surplus plus producer surplus is maximized consumer surplus is maximized producer surplus is maximized opportunity cost is minimized
7 The supplier of your _______ is most likely a monopoly. water textbooks running shoes lodgings
8 Second-hand smoke is an example of _____________________. a marginal cost an opportunity cost a welfare cost an external cost
9
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The moral principle at the center of all major religions is the _____________. fairness principle symmetry principle common property syndrome symmetrically fair principle
10 Underproduction of sanitation services will create a deadweight loss that is _________the deadweight loss that overproduction would create. greater than, less than, or the same as greater than the same as less than
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Eco06L3 1 The figure illustrates the market for haircuts. Curve A is the _______ curve, and curve B is the _______ curve.
opportunity cost; opportunity benefit marginal benefit; marginal cost marginal cost; marginal benefit total cost; total benefit
2 When 2,000 hamburgers per day are produced, the marginal benefit is $1.50 and the marginal cost is $1.00. And when 7,500 hamburgers per day are produced, marginal benefit is $1.00 and marginal cost is $1.50. The efficient production quantity of hamburgers is ________________ a day. 7,500 between 2,000 and 7,500 2,000 more than 7,500
3 If the marginal benefit from a loaf of bread exceeds the marginal cost of producing a loaf of bread, then the resources will be used more efficiently if _____________ bread is produced and ______________ other goods are produced. less; more
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more; more less; fewer more; fewer
4 In the market for CDs, 500 CDs a month are available. The value people place on the 500th CD a month exceeds the opportunity cost of producing it. Resource use _______________. would be more efficient if people would buy more CDs would be more efficient if people would value CDs more is inefficient is efficient
5 Adam makes $25,000 per year and Bob makes $45,000 a year, and they both have the same marginal benefit curve. According to the utilitarian view, if a dollar is transferred from Bob to Adam, then _______________ marginal benefit ____________________. the change in Adam's; plus the change in Bob's marginal benefit equals zero Adam's; decreases by more than Bob's marginal benefit increases Adam's; increases by more than Bob's marginal benefit decreases the change in Adam's; plus the change in Bob's marginal benefit is negative
6 The figure tells us about the market for red roses. The consumer surplus is ________________ a day.
$1,000 $800
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$20 $200
7 The figure tells us about the market for red roses. On Valentines day, the demand for red roses doubles. If florists increase the price to $30 a dozen, consumer surplus ________________.
might increase or decrease halves decreases to zero doubles
8 The figure illustrates the market for hot dogs on Big Foot Island. The producer surplus is __________.
$1.20 a hot dog $60 an hour $240 an hour $180 an hour
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9 If the marginal cost of producing a service increases, then the efficient quantity to produce _______. depends on the marginal benefit remains the same decreases increases
10 In the competitive market for balloon rides, marginal cost equals marginal benefit when 3,000 balloon rides a day are taken and the price of a ride is $130. Which of the following statements is true? There is a free-ride problem. Too few rides are available. Deadweight loss is zero. Too many rides are available.
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1 If the marginal cost of producing every quantity decreases, all the following occur except _____________. the consumer surplus increases the efficient quantity increases minimum supply price does not change marginal benefit of the last unit bought does not change
2 Which of the following statements about a competitive market is incorrect? Underproduction creates a deadweight loss. A price floor makes the market less efficient. A price ceiling makes the market more efficient. Overproduction reduces consumer surplus and producer surplus.
3 The schedules in the table give the marginal benefit and marginal cost of videotapes. If there are no external benefits or external costs, the efficient number of videotapes to produce is ________ a week.
5 1 3 any number less than 3
4 The schedules in the table give the marginal benefit and marginal cost of videotapes. At the efficient quantity, the minimum-supply price of a videotape is ______________ and the value of a videotape is
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________________.
$10; $8 $8; $10 $10; $10 $8; $12
5 The schedules in the table give the marginal benefit and marginal cost of a videotape. At the efficient quantity of videotapes, consumer surplus is _____ a week, and producer surplus is _____ a week.
$33; $27 $3; $3 $10; $10 $2; $2
6 The schedules in the table give the marginal benefit and marginal cost of a videotape. If the opportunity cost of producing a videotape increases by $2, then the efficient number of videotapes is _____ a week.
2 4 1 5
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7 The schedules in the table give the marginal benefit and marginal cost of a videotape. If the number of videotapes produced is cut to 2 a week, then the ___________________.
minimum supply price of the second videotape is $9 price is $9 a videotape value of the second videotape is $10 opportunity cost of the second videotape is $11
8 The figure illustrates the market for bagels. If the number of bagels produced is cut from 20 to 10 an hour, consumer surplus decreases by ___________.
$2.50 an hour $0.50 a bagel $5.00 an hour $7.50 an hour
9 The figure illustrates the market for bagels. If the number of bagels is cut from 20 to 10 an hour, the deadweight loss is ____________________.
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-$5.00 an hour $0 an hour $0.50 a bagel $5.00 an hour
10 The figure illustrates the market for bagels. If the number of bagels is increased from 20 to 30 an hour, consumer surplus plus producer surplus ____________ and deadweight loss is _______________.
decreases; negative increases; negative increases; positive decreases; positive
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Eco07L1 1 A price ceiling _____________________________. makes it illegal to charge a higher price than specified is necessary to maintain market equilibrium occurs in housing markets only is more effective when it is higher
2 A rent ceiling _______________________________. set above equilibrium price is effective always increases the quantity of rental units supplied set below equilibrium price is effective does not change the market price
3 A rent ceiling that is effective results in _______________________. an increase in the supply of housing a shortage of housing helping the poor more housing supplied than demanded
4 Search activity _____________________________. decreases when a price ceiling is set on a good increases when a price ceiling is set on a good is unnecessary when a black market exists occurs there is a surplus of the good
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5 The government sets a price floor for corn which is effective. All of the following, except _______________, will occur. A surplus of corn will be produced. The corn market is efficient. Tthe government will buy the corn surplus. A deadweight loss is created.
6 When a minimum wage is set above the equilibrium wage rate, ______________________. unemployment decreases unemployment increases search activity decreases the supply of low-skilled workers decreases
7 A minimum wage law ____________________. creates more employment opportunities for low-skilled workers creates unemployment among low-skilled workers creates more prosperity among younger people increases the number of good paying jobs available to young people
8 Buyers respond only to the price that _______ the tax, and sellers respond to the price that _______ the tax. includes; includes excludes; excludes excludes; includes includes; excludes
9
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If the demand for an agricultural good is inelastic, then a bumper harvest results in a lower price and farm revenue will _________________. decrease increase either remain constant or increase remain constant
10 A government price stabilization agency _______ inventory when the price is above the future expected price and _______ inventory when the price is below the future expected price. sells from; buys for buys for; sells from sells from; sells from buys for; buys for
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Eco07L2 1 An effective price ceiling on a good or service ________________________. increases the price of the good or service occurs only in the market for rental housing creates a shortage of the good or service benefits everyone who plans to buy the good or service
2 Sherry wants to rent an apartment. Although rents are below what she is willing to pay, she cannot find an apartment. Then after a month of searching, she finds an apartment but she has to pay an additional $1,000 to have the locks changed. Sherry has just experienced the effects of ___________________. a rent floor with a black market inelastic demand a market working efficiently a rent ceiling
3 Suppose the government imposes a price ceiling on staplers. When the quantity demanded of staplers exceeds the quantity supplied, ____________________________. the price of a stapler will fall the supply of staplers will increase the demand for staplers will decrease there is incentive for students to undertake search activity
4 If the government of Easy Life imposes a rent ceiling but does not enforce it, then the actual quantity of housing rented will be close to the unregulated equilibrium quantity because ___________________. people will undertake search activity the supply of rental housing is perfectly elastic Easy Life has lots of high-rise apartment buildings
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a black market will exist
5 A minimum wage _______________________. is a price ceiling in the labor market is an effective way of increasing employment changes the demand for labour. is a price floor in the labor market
6 Hair shampoo has a _______ and _______ pay most of the tax levied on hair shampoo. low elasticity of supply; buyers high elasticity of demand; buyers high elasticity of supply; sellers low elasticity of demand; buyers
7 Which of the following outcomes is not a result of a tax on gasoline? Demand decreases, the market becomes more efficient, and the price rises. Supply decreases, a deadweight loss is created, and the price rises. Demand does not change, the price rises, and consumer surplus decreases. The market becomes less efficient and the government collects the tax revenue.
8 The more elastic is the demand for a good, the _____________ likely will the government tax that good. But if the good is taxed, the ______________ is the amount of the tax paid by the buyer of the good. more; smaller less; larger more; larger less; smaller
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9 Governments intervene in agricultural markets by ___________________________. keeping prices and inventories high keeping surpluses small and prices stable stabilizing prices and equalizing the incomes of all farmers setting price floors, production limits, and holding inventories
10 Speculation in inventories of farm produce makes _______________ than it would in an unregulated market. the price of the good fluctuate less the price of the good fluctuate more the quantity produced fluctuate less the quantity produced fluctuate more
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Eco07L3 1 A forest fire destroys a large housing area. Immediately after the fire, the price of housing _______. But after some time, the ______________ starts to increase and the price starts to ______________. increases; demand; rise further decreases; supply; rise further increases; supply; fall decreases; demand; rise
2 The figure shows the market for rental units in Gladstone. The market is in equilibrium. The government now introduces a rent ceiling of $500 a month. The price of a rental unit ________ and the number of units rented _______.
decreases by $100 per month; decreases remains the same; remains the same increases by $500 per month; decreases increases by $100 per month; increases
3 When an effective minimum wage is introduced, the number of hours of labor employed is determined by the ___________ and the __________. demand for labor; minimum wage supply of and demand for labor; the minimum wage demand for labor; supply of labor supply of labor; minimum wage
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Eco07L3
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4 The table gives the demand and supply schedules for cookies. The government now levies a $0.30 tax on cookies. As a result, the price of a packet of cookies increases by __________ and the tax revenue collected is ____________a week.
$0.20; $24 $0.20; $20 $0.10; $9 $0.30; $30
5 The more ______________, the larger is the amount of the tax on the good that the ___________ pays. elastic the demand for a good; seller elastic the demand for a good; buyer elastic the supply of a good; seller inelastic the demand for a good; seller
6 The figure illustrates the market for posters. The tax on a poster is __________ and the government's tax revenue from the sale of posters is _______________a month.
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$0.50; $150 $0.35; $200 $0.35; $140 $0.35; $105
7 If the government increases the tax on CD players, _____________________. the deadweight loss increases the number of CDs purchased increases the market becomes more efficient the consumer surplus increases
8 If the penalty on sellers of an illegal good is greater than the penalty on buyers of an illegal good, then supply of the good will _______ by more than demand and the price of the good will _______. decrease; increase decrease; remain the same increase; increase decrease; decrease
9 Because most agricultural products have an _______ demand, a poor harvest in an unregulated market will _______ farm revenue. inelastic; increase elastic; increase elastic; decrease inelastic; decrease
10 During years of bumper harvests, inventory holders will _______ their inventories and farm revenue will __________. increase; increase
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decrease; decrease decrease; increase increase; decrease
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Eco07L4 1 The figure shows the market for books before and after a sales tax is introduced. The tax on books is ________ a book, buyers pay ______ of tax per book, and the governments tax revenue is ________a week.
$1.20; $0.80; $12 $1.20; $0.80; $128 $0.80; $1.20; $12 $0.40; $0.40; $4
2 The figure shows the market for books before and after a sales tax is introduced. Each week, the tax creates a deadweight loss of ________, decreases consumer surplus by ________ , and decreases producer surplus by _____________.
$3; $10; $5 $3; $2; $1 $15; $10; $5 $12; $8; $4
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3 On Green Island, the demand for pencils is perfectly elastic and the supply of pencils is perfectly inelastic. If a sales tax on pencils is introduced, _____________________. the seller pays the entire tax the buyer pays the entire tax no one pays the tax the tax is split evenly between the buyer and seller
4 The government wants to increase its total revenue and plans to implement an additional sales tax. The government will raise more total revenue if it taxes _______ rather than _______. banking services; bus travel air travel; clothing toothpaste; toothbrushes pens; food
5 If sellers of illegal goods are punished but buyers are not, then the price _______ and the equilibrium quantity _______. increases; decreases decreases; increases decreases; remains the same increases; increases
6 The table gives the demand and supply schedules for fireworks on the Island of Big Bang. In the past, because many deaths have resulted from accidents involving fireworks, the government has banned fireworks and is enforcing the ban. A $6 a firework penalty on sellers of fireworks and no penalty on buyers will reduce the number of fireworks bought to ______ a week and increase the price to ______ a firework.
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80; $11 40; $13 140; $8 0; an unknown amount
7 The table gives the demand and supply schedules for fireworks on the Island of Big Bang. In the past, because many deaths have resulted from accidents involving fireworks, the government has banned fireworks and is enforcing the ban. A $6 a firework penalty on buyers of fireworks and no penalty on sellers will reduce the number of fireworks bought to ________ a week and decrease the price to ______ a firework.
80; $5 140; $3 40; $8 0; an unknown amount
8 The table gives the demand and supply schedules for fireworks on the Island of Big Bang. In the past, because many deaths have resulted from accidents involving fireworks, the government has banned fireworks and is enforcing the ban. A $5 a firework penalty on buyers of fireworks and a $4 a firework penalty on sellers will reduce the number of fireworks bought to ______ a week and the price will be ____ a firework.
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40; $8 160; $11 80; $7 0; an unknown amount
9 With inventory speculation, _____________________________. bumper crops result in less farm revenue fluctuations in farm revenues increase supply always exceeds production supply is less than production
10 Suppose that a sales tax is imposed on a good, but the price does not change. Such a situation will occur if the _______ the good is _______. demand for; perfectly inelastic demand for; perfectly elastic demand for; unit elastic supply of; perfectly elastic
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