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Which of the following involve tradeoff:
A) buying a new car
B) going to college
C) watching a football game on Saturday afternoon
D) taking a nap
E) All of the above |
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| True or False? Economics is the study of how society manages its unlimited resources. |
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The adage, "There is no such thing as a free lunch," is used to illustrate the concept of
a) tradeoffs
b) scarcity
c) productivity
d) efficiency |
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The decisions of firms and households are guided by profit and self-interest in a:
a) command economy
b) traditional economy
c) Market economy
d) all of the above |
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In a market economy, economic activity is guided by:
a) the government
b) corporations
c) central planners
d) prices |
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The behavior of buyers is represented by:
a) Demand
b) Supply
c) a Market
d) Competition |
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The amount of the good buyers are willing and able to purchase is the
a) Demand
b) Quantity supplied
c) Quantity demanded
d) Supply |
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| True or False? Demand curve is the relationship between price and demand. |
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| True or False? If consumers expect the price of shoes to rise, there will not be an increase in the demand for shoes today. |
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| True or False? If apples and oranges are substitutes, an increase in the price of apples will decrease the demand for oranges. |
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| True or False? If golf clubs and golf balls are complements, an increase in the prices of golf clubs will decrease the demand for golf balls. |
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| True or False? If John receives a decrease in his pay, we would expect his demand for normal goods to go down. |
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All of the following shifts the supply curve of watches to the right except:
a) an increase in the price of watches
b) an advance in the technology used to manufacture watches
c) a decrease in the wages of workers employed to manufacture watches
d) manufacturers' expectation of lower watch prices in the future |
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Definition
| a) an increase in the price of watches |
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Term
A decrease in the price of a good
a) decrease supply
b) decrease the amount purchased by buyers
c) give producers an incentive to produce less
d) increase the supply |
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Definition
| c) give producers an incentive to produce less |
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| True or False? If suppliers expect the price of their products to fall in the future they will increase supply now. |
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Definition
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Term
On the graph, the movement from S to S1 is called
a) a decrease in supply
b) a decrease in quantity supplied
c) an increase in supply
d) an increase in quantity supplied |
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On the graph, the movement from S to S1 could be caused by
a) a decrease in the price of the good.
b) an improvement in the technology.
c) an increase in income.
d) an increase in input prices. |
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Definition
| b) an improvement in technology |
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| True or False? When the price of a good is below the equilibrium price, it causes a surplus. |
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Definition
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| True or False? The price where quantity supplied equals quantity demanded is called the equilibrium price. |
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Term
| True or False? If the quantity demanded of a good is sensitive to change in the price of that good, demand is said to be price inelastic. |
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| True or False? The demand for a necessity such as insulin tends to be elastic. |
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| True or False? The demand for a good would tend to be more inelastic the fewer the available substitutes. |
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Definition
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| True or False? A good would have a more inelastic demand if it is considered a necessity. |
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| True or False? In general, a flatter demand curve is more likely to be price elastic. |
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Definition
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| True or False? Demand is inelastic when elasticity is less than 1. |
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Definition
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| True or False? Suppose there is a 6% increase in the price for good X and a resulting 6% decrease in the quantity of X demanded. Price elasticity of demand for X is 6. |
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Definition
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| True or False? If the price elasticity for a good is 4.0, then a 10% increase in price would result in a 4% decrease in the quantity demanded. |
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Suppose that at a price of $30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to $40 per month, the number of subscribers will fall to 20,000.
Using the midpoint method for calculating the elasticity, what is the price elasticity of demand for cable TV in Small Town?
a) 0.66
b) 0.75
c) 1.0
d) 1.4
e) 2.0 |
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Definition
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If the income elasticity of demand for a good is negative, it must be
a) a luxury good
b) a normal good
c) an inferior good |
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Definition
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Term
If consumers think that there are very few substitutes for a good, then
a) demand would tend to be price elastic
b) demand would tend to be price inelastic
c) supply would tend to be price elastic |
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Definition
| b) demand would tend to be price inelastic |
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| True or False? The price of vehicles for this week is likely to be more price inelastic than the supply of vehicles for this year. |
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Definition
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| True or False? the price elasticity of supply tends to be more inelastic as the firm's production facility reaches maximum capacity. |
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Definition
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| True or False? If supply is price inelastic, the value of the price elasticity of supply must be less than 1. |
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Definition
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| True or False? If a 30% change in price causes a 15% change in quantity supplied, then the price elasticity of supply is 1/2 and supply is inelastic. |
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Definition
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| True or False? If sellers respond substantially to changes in price, then sellers are considered to be relatively price sensitive. |
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Definition
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Barb's Bakery made $200 last month selling 100 loaves of bread. This month it made $300 selling 60 loaves of bread. The price elasticity of demand for Barb's bread is
0.583
1.25
0.266
1.11 |
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Suppose that the cross-price elasticity of demand between hot dogs and mustard is -2.00.
This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to
fall by 200 percent
fall by 40 percent
rise by 200 perent
rise by 40 percent |
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In january the price of widgets was $2.00 and Wendy's Widgets produced 100 widgets. In february the price of widgets was $2.50 and Wendy's Widgets produced 150 widgets. In March the price of widgets was $3.00 and Wendy's Widgets produced 200 widgets. The price elasticity of supply of Wendy's Widgets was
1.80 when the price increased from $2.00 to $2.50 and 1.57 when the price increased from $2.50 to $3.00
2.00 when the price increased from $2.00 to $2.50 and 1.66 when the price increased from $2.50 to $3.00
1.66 when the price increased from $2.00 to $2.50 and 1.50 when the price increased from $2.50 to $3.00
0.56 when the price increased from $2.00 to $2.50 and 0.64 when the price increased from $2.50 to $3.00 |
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Definition
| 1.80 when the price increased from $2.00 to $2.50 and 1.57 when the price increased from $2.50 to $3.00 |
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| True or False? A price ceiling set below the equilibrium price causes a surplus. |
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| True or False? Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers. |
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